FTC Creates Office Dedicated To "Algorithmic Transparency" 75
jfruh writes When Facebook's EdgeRank algorithm filters a meme you posted out of your friends' feed, you might find that annoying. When your bank's algorithm denies you a mortgage, that has a serious effect on your life. But both kinds of algorithms are generally opaque to customers and regulators, and the FTC's Bureau of Consumer Protection has set up an office dedicated to figuring out these algorithms affect our lives and intersect with the law. Perhaps they can start with how the IRS selects people to audit, and whether constantly shifting TSA policies make sense.
Gaming the system (Score:1)
No selection algorithm is perfect. There will be ways to exploit aspects. By knowing all the algorithm it may be much easier to game the system and gain false advantage. For example, financial transactions over a certain dollar value, I think $10k, have to be reported. This leads to many transactions that are $9,999.00.
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The point is that with a transparent algorithm, you'll know the cooldown period, degree-of-separation, and other factors considered between the transactions and you can take those into account and avoid getting audited. Even if you're doing something extremely shady and probably illegal.
No algorithm is perfect in every domain. Go watch a NES TAS video and you'll see how an all-knowing, all-powerful controlling entity can completely destroy any sense of fair play. Now imagine that sort of "ownage" in a payme
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having multiple $9,999.00 transactions is a nearly guaranteed way to get an audit.
Falling foul of Benford's law.
Re:Gaming the system (Score:5, Informative)
It's perfectly legal to make a $10k cash deposit into or withdrawal from your bank (assuming that the underlying use/source of the cash is legal, of course). It is, however, definitely ILLEGAL to make a $9999 deposit for the purpose of staying below that $10k limit. It's called structuring, and can get you into a lot of trouble.
As an example, you sell a car for $13,000, and get paid in cash. If you go and deposit that $13k in cash in the bank, you're entirely kosher. It'll generate a currency transaction report, but they're not at all uncommon.
If, however, you deposit $9k, and then $4k, to stay below that $10k ceiling, you've just committed a federal crime. https://en.wikipedia.org/wiki/... [wikipedia.org]
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Not all structuring gets caught. It was just an example of how knowing an algorithm can modify behaviour to change the outcome.
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It was just an example of how knowing an algorithm can modify behaviour to change the outcome.
Why is that a bad thing? If I am going to be judged by an algorithm, don't you think I should know what the parameters are? How can I ever rectify a problem parameter if I don't know what it is?
There will always be cheats, you can't eliminate them all you can do is minimise their damage. There comes a point when the efforts to catch cheats outweighs the benefits, the system itself suffers as the rules and parameters expand in an attempt to catch every last petty cheat. The US health system(s) are a prime
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But to too many US "law enforcement" agencies the fact a criminal may also do something similar gives them enough leeway to seize your money and use it as their own.
Civil forfeitures laws in the US are so ridiculous that if you happen to get pulled over for speeding on the way back from selling your motorcycle for cash, the cops can seize the money "just in case", or more related to this depositing issue, if you happen to run a small store and do nightly deposits under 10k (because that's what was in the ti
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It's perfectly legal to make a $10k cash deposit into or withdrawal from your bank (assuming that the underlying use/source of the cash is legal, of course). It is, however, definitely ILLEGAL to make a $9999 deposit for the purpose of staying below that $10k limit. It's called structuring, and can get you into a lot of trouble.
As an example, you sell a car for $13,000, and get paid in cash. If you go and deposit that $13k in cash in the bank, you're entirely kosher. It'll generate a currency transaction report, but they're not at all uncommon.
If, however, you deposit $9k, and then $4k, to stay below that $10k ceiling, you've just committed a federal crime. https://en.wikipedia.org/wiki/... [wikipedia.org]
Which is stupid and they should just change the law.
The minimum threshold for what needs to be reported was probably set before banks had the ability to easily report all transactions automatically, and the law about structuring is a kludge to fix the bug the created when the set a lower amount bound on reporting requirements.
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You want all banking transactions reported to the Feds? Personally, I'd rather not.
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They have access to the data, which I'm not real happy with. I'd rather not see all transactions automatically reported.
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So instead of fixing the algorithm, they wrote a new law making it illegal to exploit the algorithm.
That's your federal government at work!
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How would you have suggested they "fix" the algorithm?
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Certainly an option, but would make it extremely difficult, if not impossible, to stop money laundering, and hence effectively increase the profitability of a lot of illegal activity.
Re:Gaming the system (Score:4, Interesting)
Certainly an option, but would make it extremely difficult, if not impossible, to stop money laundering, and hence effectively increase the profitability of a lot of illegal activity.
I don't have a problem with that. I think a lot less illegal activity should be illegal.
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What would prevent a bank from making a transaction report for me when I deposited the 4000 dollars?
Then you've just lowered the threshold for reporting to $4000. That means they've reported your $9000 deposit and the $4000 one. And anyone else who has deposited more than $4000. Like me, when my paycheck is deposited.
I have to keep track of my deposits and request a report myself?
No, the bank does it.
Shouldn't the teller inform me that I am over the reporting limit and the IRS might seize my money?
No. What makes you think the IRS is going to seize your money just because you deposited more than $10,000? It happens alot. It isn't a crime. BUT it can be combined with income information and might cause an investigation if you're busy making routine $20,000 deposit
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The law against gaming the system is there not to catch people who just split the deposits...
Except when it's used just to catch people who split [theburningplatform.com] the deposits.
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Except when it's used just to catch people who split the deposits.
Except it wasn't. Since amounts less than $10,000 are not reported, the reports cannot be used to catch people who are just splitting deposits. The article you linked to said it was her other financial activities that raised the red flag, at which point the investigation disclosed the deposits. They didn't come knocking just because of the deposit pattern.
Not saying the government is acting appropriately in this case, but she did break the law.
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I know you're probably purposely being obtuse here, but the IRS doesn't seize your money if you deposit more than $10K at a time. If they did, I would be broke, as they would seize my paycheck every month. The $10K "limit" is a threshold for an alert, not extra-jurisdictional action to seize your money. That the $10k level was imposed decades ago, when it was far less common for individuals to be making deposits or withdrawals of that amount, still holds today is just another example of how short-sighted an
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Knowing what specific values triggers audits has nothing at all to do (hopefully) with the algorithm; it's just a variable.
If an algorithm has to be secret, it sucks. The good cryptographic algorithms are all publicly available. It's only the keys that are secrets.
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You need to get a Credit Union. The credit union I deal with bends over backwards to avoid fees. For example, there have been times that my paycheck deposit has come late in the day but withdrawals have come out earlier and should have caused an overdraft fee. But because my regular pattern was to deposit my pay that day no fee was charged. That is one of the many reasons I deal with a Credit Union and not a Bank.
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Sounds like people need to find a bank or credit union that doesn't suck. Huntington for example not only does credits before debits but they also give you 24 hours to make up any overdraft and will automatically pull from your savings to make it up if you have agreed to let them.
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When you find people gaming the system and the results of that are undesirable, isn't that a good time to refine your algorithm?
What's so magical about the $10,000 number? Why not $9,999, or $10,001? Should it be indexed to inflation? Did someone pull that number out of thin air, and if so, is that a responsible way to write laws?
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When you find people gaming the system
There is the rub. Sometimes you don't notice the system being gamed until too late.
What's so magical about the $10,000 number?
Laws have to be black and white. The line is arbitrary but well defined. That is how laws work. If inflation causes the number to be too low they can change the law.
Lets not go too far into this specific case. It is just an example of how knowing an algorithm can facilitate gaming the system.
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That still doesn't explain why $10,000 is a better number than $9,999 or $10,001. The fact that it's a suspiciously round number suggests negligence on the part of whoever wrote the law.
How would you know whether the number is too low? Why wasn't that same mechanism used to help write the law long ago when the cost of making changes to the law was much lower?
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That still doesn't explain why $10,000 is a better number than $9,999 or $10,001.
Round numbers are easy to remember and deal with. It is the same mechanism that sets limits for severyity of theft and damage laws. For example, theft under $1000 is a different degree of severity than theft over $1000. The former is usually a misdemeanour while the latter is a felony. These numbers are arbitrary and have changes by amending the laws over the years.
How would you know whether the number is too low?
When too many transactions get reported and the investigation teams get swamped.
Why wasn't that same mechanism used to help write the law long ago when the cost of making changes to the law was much lower?
Because the mechanism is subjective and laws have to be objectiv
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That's true, but other than criminals, who needs to memorize how much a person can deposit before it gets reported?
That's an objective metric, certainly better than picking a number out of thin air as the first one appears to have been. Maybe they should write that into the law and also that the number must be re-determined periodically so it's never too
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That's an objective metric, certainly better than picking a number out of thin air as the first one appears to have been.
Unless there is an exact number assigned to the metrics it is a subjective metric. There are two solutions to the issue of overwork; raise the number or hire more people. Decisions like that are made by elected officials and are not written into laws.
picking a number out of thin air as the first one appears to have been.
That is an assumption on your part. Maybe a full analysis was done and a round number close to the optimal number was selected. Yes laws like this are arbitrary.
Maybe they should write that into the law and also that the number must be re-determined periodically so it's never too high nor too low.
Sometimes it is which is called sunsetting. On the other hand why mandate when a number has to be re
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That also happens to be a power of 10? There's only a 1 in 10 chance of that happening in real life, so that's not likely.
Someday the number will need to be raised, so why not plan for the inevitable?
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Someday the number will need to be raised, so why not plan for the inevitable?
They did by allowing the law to be amended when needed and not at an arbitrary time.
It is interesting that you have a problem with an arbitrary number but not with an arbitrary amendment timeline.
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not from personal experience, mind you. (Score:2)
And voting machines.
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The Breathalyzer issue looks like an implementation issue and not an algorithm issue.
Keep private things private (Score:2)
Yes, it may make sense to audit and review the algorithms used by public agencies. But private ones (including banks) should not be so molested...
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This is all part of a paranoid witch-hunt to identify supposed racial discrimination hidden in algorithms.
Regulators just can't believe that that there might be any difference in the races and that risk might correlate with race.
Any difference in lending rates is seen as proof of discrimination.
The only way lenders could avoid cries of "racist" was to try and automate judgement.
Well now that the algorithms produce similar results, it must be racist algorithms denying loans to innocent victims.
The same thing
It's only a matter of time... (Score:3)
...before this new "office" starts demanding access to not only the underlying data, but the specifics of the algorithms themselves. The amount of heavy handedness that focusing on the algorithms, as opposed to say the effects of the business practices themselves, that can be brought raises the bar on a government way too willing to be heavy handed.
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Yeah it is really crappy that a company can lie to the credit agencies about you, destroying your credit score and there is nothing you can do about it. I mean, you can file to have the information in your credit report corrected (because those are statements of facts which would constitute libel), but they aren't required to stop including that information in your credit score (because the score is a statement of opinion) and they usually don't.
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I've never generated a penny in fees to any lending institution and yet I too have an 800+ rating so there is more than one way to score highly in FICO and other scoring systems.
All banks "too big to fail" (Score:2)
should be required to cease algorithmic trading until they can prove that their trading algorithms are logically equivalent to a particular reference algorithm provided by the FTC!
If they can't show what Diabold Did in 2004 (Score:2)
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TSA algorithm (Score:2)
Yeah, why not FICO? (Score:1)
.... what about our crufty friend the FICO score? If the FTC truly cares about "consumer protection" then shouldn't they seek some "transparency" there? I can't think of an opaque metric that has a greater impact of the lives of consumers today. Perhaps it's not interesting enough for regulators creating more make work jobs in Washington.
Maybe start with the No-Fly list? (Score:4)
All the "suspected terrorist" lists are notorious for their unrestricted inclusion/non-existent removal policies, none more so than the No-Fly list.
It might not be glamorous to review a blank 'algorithm' but it would be a significant step for transparency in government. That is where the focus should be. We need to make a lot of noise to support this point of view. Otherwise all the usual race-baiters and niche-problem whiners will disperse and ruin what could have become a powerful tool.
Neural Nets (Score:2)
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Secure multiparty computation algorithms provide fully visible algorithms that remain a black box.
A neat trick.
http://www.cs.bris.ac.uk/~nige... [bris.ac.uk]
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Absolutely right, though there are still useful things that could be explained: the types of inputs the algorithm accepts, the range of outputs it can potentially give, the model used, etc. In the '90s researchers experimented with building more scrutable models (like decision trees) using a neural net as the training source, with encouraging results [1], but I think the work languished when neural nets went out of fashion.
More importantly, I think this showcases how opaque learning systems (while potential
That was some pretty stupid political commentary.. (Score:2)
Timothy, that was some pretty lame and obvious political axe-grinding there... and completely off-topic from both the summary and the article.
The Federal Trade Commission, by it's very nature, regulates trade (as in, private businesses.)
The TSA and IRS are completely out-of-scope of their jurisdiction. (This kind of role is usually handled by the GAO.)
Car Insurance, and other Mandatory Services (Score:2)
The first thing that came to my mind was car insurance, though of course now that health insurance is required, we need to be able to see that, too. Any insurance policy you're required to have, they should be required to show you the algorithm and all the relevant data. Of course, that's their secret sauce, but I don't care. If we're forced to have it, it's only fair.
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Screw car insurance, how about MEDICAL insurance. How do they decide who will or won't get a procedure covered. The true death panels may be insurance company algorithms.
Google Play - More transparency for Suspensions (Score:1)