Observer Leader calls for escrow

[Dave Bird]

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In article <BC28A9E979C56C44BCBC2DED313A44704BA0ED@bond.campus.ncl.ac.uk
>, Q G Campbell <Q.G.Campbell@newcastle.ac.uk> writes
>Another problem with the 'logic' is that the rest of the world may not
>necessarily deploy technology in the way that we do. One example of this
>is the age-old underground banking system that is widespread in South
>Asia and among Chinese communities in East Asia [*]. No amount of
>escrowed keys and deployment of sigint will help in tracing the movement
>of cash through it.
>
>It allows money to be moved quickly across borders and leaves almost no
>paper trail. Known as "hundi" in Pakistan and "fei qian" in China it
>works as follows [*]: A client approaches an underground bank in a major
>Asian city, usually a travel agent or a goldsmith's shop. He deposits an
>amount in US dollars to be remitted to an associate in another country.
>The shop gives the sender a "receipt" or chit which might be something
>as simple as a specially marked ticket stub or a low-value currency
>note. The chit is mailed to the recipient in the other country who then
>presents it to an associated travel agent or goldsmith there. He
>receives in exchange the amount in local currency equivalent to the
>amount of US dollrs deposited by the sender of the chit. 

 This is variously known as a "transfer payment" system.  It works
 quite well if, say, a Hong Kong jeweller has a branch in New York
 which remits all profits back home.  The owner is not at all 
 perturbed if New York pays out part of the money it was to remit
 home, in return for a balancing deposit at home.  If there are 
 two different owners then they will want the payments somehow
 reconciled and (think about it) there would be balancing flows
 of money, or else valuable good must cross borders to reconcile it.  
 There may not even be a token passed, it may be one proprietors
 word to another but then they would have to communicate their word.
 Their communication need not even pass over borders if, instead,
 the New York branch manager goes home to Hong Kong monthly
 to receive instructions, or otherwise they move the information
 in the mind or luggage of a trusted courier.
 Even more perniciously it may be combined with "transfer pricing"
 systems, where the person paid receives his money but selling 
 the payer potatoes and ten pound each or being paid for 
 consultancy work or expert advice which was never worth that much 
 or perhaps was not done at all... ah, but prove it!

 Now none of these systems are broken by intercepting and reading
 the communication, not if they are done by trusted courier. The 
 only way you get them is by putting surveillance on the activities
 of the end-points.  "Why did Aid For Albania buy fifty crates of
 rifles and ship them to Sudan?   What did Mr Chang get for the
 deposit he paid into the Hong Kong branch which you  neither 
 recorded or refunded to him??"  Ultimately you have to seize
 and audit the books at an end point to prove what went on.
 Incidentally, one way for a courier to transfer a key is to 
 take a pack of cards in his pocket, the order of the cards
 representing the key.   

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