Trust in Financial Institutions

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Trust in Financial Institutions Should be a Primary Role of Good Governments


Since the earliest recorded human history, governments have been in the business of establishing a trusted medium of exchange. Primarily so that they can fund their own operations, collect taxes and encourage trade.[1]

The rules that governments use today to control their fiat currencies are focused on two primary problems, debasement by techniques like counterfeiting and misuse like money laundering. This article focuses on the governments' efforts to control misuses and the trouble that their efforts create for identifiers of humans and other legal entities.

Trusted Bankers

The banks that succeeded were always the ones that were good fiduciaries of the assets held by them. But the rise of Vulture Capitalists caused banks to focus on cost reduction, which typically means eliminating risk. The following section emphasizes the duty that a bank had to verify that a payment request was valid.

Trusted Signatures

The original check, or bank draft, depended exclusively on the signature, or seal, made by the owner of the assets held by the bank. If the signature was forged; the bank might be held liable for the loss of any such forged draft. The banks try to avoid liability so the used any change in technology to reduce their liability. For example, when check images were introduced to replace paper checks, the banks wrote into the law that they didn't need to compare signatures any longer. Then when electronic teller machines were introduced, they held the customer responsible for fraud loss. Many central banks later discovered that banks were doing a poor job at security, because it was no longer their risk of loss. When that happened, most central banks limited the loss to individual consumers. Now that direct electronic payments are on the rise, consumers are again seeing the attempt by bankers to foist their bad security off on their customers. See the web page Zelle Fraud for example in the US. The UK is experiencing the same effect.

Samuel M Smith PhD 1st degree connection1st Creator KERI at wrote this on 2022-02-22 about digital signatures in Verifiable Credentials. If this principle were applied to asset transfer, consumer will be defrauded with no recourse.

Tom Jones I think that you are putting the burden of proof in the wrong place. The assumption is that ecosystem in which the holder or controller of the private key i.e the signer and the verifier of the signature operate makes the signer accountable for its own key compromise. The signer by virtue of engaging in discourse using a digital signature accepts that liability and therefore has incentive to keep it a secret. This is the legal framework that EiDAS (EU) and ESIGN and UETA in North America are based on. Thus, the signer has the burden of proof to prove forgery not the verifier.

The point of using a Verifiable Data Structure for key state is to enable a verifier to appraise the key management quality and assess the associated risk to better protect itself but it does not remove the accountability and liability from the signer should the signer not protect its keys. One of the things KERI does is provide recovery and reconciliation rules so that both signer and verifier can bound their own risks with respect to a transaction involving a signature by the signer. This risk can be moderated by using a third-party notary that insures (see EiDAS) signatures.

Recognizing Good Governments

The major challenge is that some governments profit from activities under their control that would be illegal in other parts of the world. This is especially true of money laundering. Before the flow of money can be controlled, it must be tracked. That typically means that governments force bankers to identify the entities that move large amounts of money, especially movement across national boundaries. What this means is that some international body or some country, like the United States, that has a vested interest in maintaining its currency as a reserve current held by other counties, will establish rules and rate other governments on their adherents to those rules. There is an international body that performs this function, but there are also officious bureaucrats in the EU that want to appear to be helping, by targeting the small fish. Read on for the clown circus, I expect that this effort must be run by inspector Clouseau.

Financial Action Task Force

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

Members are:

  1. Argentina
  2. Australia
  3. Austria
  4. Belgium
  5. Brazil
  6. Canada
  7. China
  8. Denmark
  9. Finland
  10. France
  11. Germany
  12. Greece
  13. Hong Kong (China)
  14. Iceland
  15. India
  16. Ireland
  17. Israel
  18. Italy
  19. Japan
  20. Korea
  21. Luxembourg
  22. Malaysia
  23. Mexico
  24. Netherlands Kingdom of
  25. New Zealand
  26. Norway
  27. Portugal
  28. Russian Federation
  29. Singapore
  30. South Africa
  31. Spain
  32. Sweden
  33. Switzerland
  34. Turkey
  35. United Kingdom
  36. United States

European Commission

Has taken it upon itself to issue lists of third countries with weak anti-money laundering and terrorist financing regimes. Which include 4 possession of the United States and Saudi Arabia, which is jointly responsible for the Terrorist Financing Targeting Center (TFTC), a collaborative approach to confronting new and evolving threats arising from terrorist financing.[2]

But chose not to list these countries which are either part of the EU or close trading partners, but are on the FATF list or have been sanctioned by the EU:

  1. Isle of Man
  2. Norway
  3. Austria
  4. Portugal
  5. The Channel Islands
  6. Luxembourg or Malta

It seems like the EU bureaucrats primary goal is to find someone to blame, other than their members, for the problems with money laundering.


  1. James Buchan, Frozen Desire. (1997) ISBN 0-374-15909-2
  2. Jack Ewing +1, Europe Flags U.S. Territories in 'Dirty Money' List. (2019-02-14) The New York Times p. B4