Information Technology and Ethics/Privacy and Finance

Introduction

Privacy for digital transactions is becoming increasingly important. Data breaches are now an inevitable part of our digital lives, but unlike other global events, many financial institutions collect information about their customers as a regular part of their business of providing products or services. For example, when you apply for a loan, you provide your name, phone number, address, income, and details about your assets. As the institution considers your application, it may collect additional details from other sources, such as credit reports prepared by credit bureaus. Even when you use a financial product-a credit card, for example-your institution will have a record of how much you buy and borrow, where you like to shop, and whether you repay your balance on time.  Besides leading to more unwanted junk mail and telemarketer calls and credit card cramming, privacy invasions and information sharing could lead to denial of insurance or loans. Privacy invasions also lead to expensive rip-offs, identity theft and stalking.

Privacy and Finance Risk Factors

Stolen Credentials

When addressing privacy in finance there are some important risk factors to look at. These are areas of privacy in finance that can be more susceptible to attack or breach compared to other areas. One of these areas is private credentials. These credentials are used to access financial information like bank statements or accounts. According to a Ponemon study from 2021, the compromising of those details accounted for 20% of breaches. This is such a big factor since once those credentials are obtained, it is hard for a security system too identify them as being false or misused. So, keeping those credentials private can help maintain privacy for finances and financial institutions.

Legal Compliance

Another important area of risk to look at in finances is compliance with local, state, and/or federal law. Oftentimes, data needs to be kept private not just out of an ethical imperative, but also due to a legal requirement. For example, if a medical institution in the United States fails to comply with the Health Insurance Portability and Accountability Act (HIPAA), they can face up to a $25,000 fine in civil violations, and up to $50,000 fine plus jail time for criminal violations. In the United States, there are no national privacy laws, so those instances will vary state to state. However, the General Protection Data Regulation (GDPR) from the European Union (EU) does impose either a €20 million or 4% of annual global gross revenue (whichever is greater) on violators of their privacy regulations.

Statistics

Every year millions of instances of identity theft and fraud occur in the United Sates of America. Below are some statistics from the Federal Trade Commission's (FTC) Consumer Sentinel Network ranging from 2018 to 2022. These statistics show how reports of identity theft and fraud have increased over the years in the past, only decreasing in total amount of reports in 2022.

Identity Theft and Fraud Reports in the United States from 2018 to 2022

Year	Identity Theft Complaints	Fraud Complaints	Other Consumer Complaints	Total
2018	444,338	1,523,295	1,203,425	3,171,058
2019	650,523	1,893,941	982,142	3,526,606
2020	1,388,539	2,365,362	1,318,247	5,072,148
2021	1,434,693	2,923,241	1,633,677	5,991,611
2022	1,108,609	2,369,527	1,694,993	5,173,129

It is also important to know what forms of identity theft are most prevalent. In 2022, the most common form of identity theft was credit card fraud, where the perpetrators would open a new credit card under someone else's name and use it themselves. Below are some statistics from the FTC's Consumer Sentinel Network on other most common forms of identity theft in 2022.

Top Five Most Common Forms of Identity Theft in the United States in 2022

Type of Identity Theft	Amount of Reports	Proportion of Top Five
Credit Card Fraud - New Accounts	409,981	43.7%
Miscellaneous Identity Theft*	263,419	28.1%
Bank Fraud - New Accounts	110,513	11.8%
Tax Fraud	78,588	8.4%
Business/Personal Load	76,020	8.1%
Total	938,521	100%

*This refers to forms of identity theft like online shopping and payment account fraud, email and social media fraud, medical services fraud, insurance and securities account fraud, and other types of identity theft.

What do they do with your information?

Banks share experience and transaction information, but also share Social Security Numbers. On the positive side, federal regulators have determined that Social Security Numbers are non-public personal information that cannot be shared by financial institutions if consumers exercise their right to opt-out under the new law. Banks have been sharing names, addresses and Social Security Numbers of customers with credit bureaus, which subsequently sold this information to internet information brokers, private detectives, and debt collectors. Most experts believe the sale of these products, known as credit headers, leads to financial identity theft and stalking. Over 500,000 Americans a year are victims of identity theft.

There is Someone Listening

Gregory Mankiw from Harvard University wrote about the nature, features, and functions of money. He explains that Money is the language via which societies transact goods and services and coordinates. As cash starts to disappear from societies and new digital forms of payments are introduced, for example credit cards and digital payments, transactions without intermediaries also start to go away. This means that people lose the ability to have privacy on our financial transactions and many of our fundamental rights and freedoms are undermined. By stripping away financial privacy in many ways people lose their fundamental rights. For example with modern credit cards people are surveilled via their associations they form, the contents of their purchases and also their geographical location. This means that people can no longer transact privately as an intermediary like a bank is there surveilling these associations. People can be tracked through the whereabouts of their bank accounts. All of these are critical aspects of rights and as cash starts to fade away our freedoms gradually start to go away. Governments can also gain significant power from such a system as they can control the people and their political opponents and also penalize expressions. Privacy is crucial to a liberal and democratic society. Even the most prominent advocate for ridding economies of large note denominations, Harvard economist Kenneth Rogoff, acknowledges “we need cash for privacy.”