Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Can governments be trusted with financial data?

When the UK government loses CDs
containing name, addresses, date of birth, child benefit and national
insurance numbers and bank details relating to 25 million people

(40% of the population), we must ask the question whether governments
can be trusted with financial information on a large scale.

A comment
by a reader of the Times Online
underscored the
gravity of the problem:

Given the large number of government employees that clearly
have access to these databases, if the administration and security
systems in place allow for this kind of data to be burned onto an
external removable disc, then it is inevitable that such data already
has been (or will be) deliberately taken and sold to identity theft
fraudsters by a modestly paid, unscrupulous civil servant (it is
unfortunately naive to assume everyone is honest).

This is an issue that has largely been addressed in banks and other
financial institutions who have historically held our private data,
and who have measures in place to prevent such extraction of
confidential data.

The idea of a “momentary blunder” or accidental loss
seems to miss the real risk.

It is true that the private sector is a little better at handling
data, but then the US telecom operators have shown that they are more
than happy to part with data to the government even when the government
requests the data illegally.

In the Indian context, I am worried about the huge amount of data
that is being collected under the tax information network. Moreover,
as India makes hesitant moves towards electronic payment systems,
there seems to be a great deal of eagerness on the part of everybody
including the tax authorities to collect and preserve all the
transaction data. If somebody wants to do data mining on a few
petabytes of data, that is fine, but who will ensure the safety of all
the data? Whom can we sue if the data is lost or stolen?

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