Comments on: Identity might work better bottom up http://tomorrowstransactions.com/2014/06/identity-might-work-better-bottom-up/ Thought leadership from Consult Hyperion Wed, 25 Jun 2014 18:36:20 +0000 hourly 1 http://wordpress.org/?v=3.9.1 By: Michael Joyce http://tomorrowstransactions.com/2014/06/identity-might-work-better-bottom-up/#comment-232446 Tue, 10 Jun 2014 03:39:07 +0000 http://tomorrowstransactions.com/?p=4480#comment-232446 In looking at top-down vs bottom-up identity, I think it’s best to think about the reason for wanting to verify an ID. If the reason for KYC is for creditworthiness, protection from default, then crowdsourcing is probably a great approach. Similarly for fraud, the provider would need to look at the risk-reward equation of creating a fraudulent profile to determine if top-down or bottom-up verification works better. Is it easier to make a fake ID, or to create a robust-looking friend network on facebook?
However, if the reason for the Customer Due Diligence is for counter-terrorist-financing or anti-money-laundering, the risk-reward calculation is very different as it starts to become a compliance rather than a risk decision. Using bottom-up or crowd-sourced identities here will only work if your regulator truly understands “risk based assessments”, and you are confident you have sufficient information to provide law enforcement agencies in the event of an investigation.

]]> By: Iang http://tomorrowstransactions.com/2014/06/identity-might-work-better-bottom-up/#comment-232194 Mon, 09 Jun 2014 14:11:49 +0000 http://tomorrowstransactions.com/?p=4480#comment-232194 On identity schemes. While the central point that government identity schemes are not all they are cracked up to be is well made, it doesn’t mean that we can do better with some random crowd-sourced scheme. We have to look at why there is a problem with government schemes, and without this understanding, there isn’t much expectation that we won’t then make the same mistakes.

Identity schemes typically stop at the point of the name; they leave the problems to (fast windmilling hands seen here) another party. A well crafted identity scheme includes a way to establish the value at risk and mitigate harm to it, and this is needed for finance, because there is … value at risk. Without this attention to contract and theft, the schemes touted are pretty by not really strong enough to support finance.

And, as a specific conclusion, I’d say that anything that is crowd-sourced cannot be strong enough, because it is the crowd by definition. So why bother? We need more precision, such as is found in a tightly designed social network. For specific meat and a template, don’t look at Facebook, rather look at CAcert’s Assurance Programme which can be adjusted to meet the needs of a financial network.

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