Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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April 18, 2016
"I want to be alone; I just want to be alone"
This was spoken forlornly by the Russian ballerina Grusinskaya in the 1932 film Grand Hotel by the famously reclusive screen star Greta Garbo. This movie line causes me to occasionally wonder why we all can't just be left alone. Narrowed to payments, why does paying anonymously have to indicate you are hiding something nefarious?
Some of you may be asking why it would be necessary to hide anything. I offer the following examples of cases when someone would want to pay anonymously, either electronically or with cash.
- Make an anonymous contribution to a charitable or political organization to avoid being hounded later for further contributions.
- Make a large anonymous charitable contribution to avoid attention or the appearance of self-aggrandizement.
- Recompense someone in need who may or may not be known personally with no expectation or wish to be repaid.
- Pay anonymously at a merchant to avoid being tracked for unwelcome solicitations and offers.
- Make a purchase for a legal but socially-frowned-upon good or service.
- Shield payments from scrutiny for medical procedures or pharmacy purchases that are stigmatized.
- Personally, use an anonymous form of payment to avoid letting my wife find out what she will be getting as a gift. (Don't worry; my spouse never reads my blogs so she doesn't know she needs to dig deeper to figure out what she is getting.)
Some of these cases can be handled easily with the anonymity of cash. As cash becomes less frequently used or accepted or perhaps even unsafe or impractical, what do we have as an alternative form of payment? Money orders such as those offered by the U.S. Postal Service are an option. The postal service places a cap of $1,000 on what can be paid for in cash. Nonreloadable prepaid cards such as gift cards offer some opportunity as long as the amount is below a certain threshold. Distributed networks like bitcoin offer some promise but may come with greater oversight and regulations in the future. Some emerging payment providers claim to offer services tailored for anonymous payments. Still, though, the future for a truly anonymous, ubiquitous payment alternative like cash doesn't look promising, given the current regulatory climate.
I acknowledge that one needs to find a proper balance between vigorously tackling financial fraud, money laundering, and terrorist financing and the need that I think most of us share for regulators and others to keep out of our personal business unless a compelling reason justifies such an intrusion. Consequently, we should be scrupulous about privacy but offer the investigatory tools when payments are used for nefarious purposes to identify the activities and the people involved. In many ways, this balancing act dovetails with the highly charged debate going on between the value of encryption and the needs of law enforcement and intelligence agencies to have the investigatory tools to read encrypted data. As Greta Garbo famously said and perhaps inadvertently foretold, some of us just want to be left alone.
By Steven Cordray, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed
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