Prof. Jayanth R. Varma's Financial Markets Blog

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Prof. Jayanth R. Varma's Financial Markets Blog, A Blog on Financial Markets and Their Regulation

© Prof. Jayanth R. Varma
jrvarma@iima.ac.in

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Tue, 02 Jul 2019

Deep fakes in finance?

For the last couple of years, I have been following the phenomenon of Deep Fakes with a mixture of cynicism and disinterest. It is only in the last few weeks that I have begun to worry that this is not something that concerns only a few celebrities, but could become a problem for the financial sector in general.

Last week, I read two things that brought the matter to focus. First was the news report about the fake French minister in a silicone mask who stole millions of euros from some of the richest men of Europe (h/t Bruce Schneier). The minister who was impersonated was quite impressed by the quality of the fake video: “They did a pretty good job. Unfortunately some people fell for it. They did a really good impression of my voice. But no-one can truly pass themselves off as me.”

The second was the following recommendation in the report of the Expert Committee on Micro, Small and Medium Enterprises set up by the Reserve Bank of India under the Chairmanship of Shri U K Sinha:

Presently the KYC process is manual and necessitates a physical presence, thus increasing costs and timelines in completing the required KYC processes. As an alternative to enabling e-KYC, the Committee recommends video KYC to be adopted as a part of digital financial architecture as a suitable alternative to performing a digital Aadhaar-based KYC process towards enabling non-physical customer onboarding. (Box XIV- Video Based KYC in Chapter 8)

It appears to me that we will see more of this: only a handful of Luddites will oppose the use of technology that saves cost and eliminates hassles. However, it is part of the folklore of digital security that you can pick any two of Secure, Usable and Affordable – you cannot get all three. Most market architectures would make the natural choice of Usable and Affordable and de-prioritize Security. Deep Fakes would thus emerge as a problem for mainstream finance over a course of time, but I guess it will (perhaps rightly) be treated as a cost of doing business.

Posted at 13:03 on Tue, 02 Jul 2019     View/Post Comments (0)     permanent link