2021iv16, Friday: The king of the Ponzi?

Madoff’s dead, but fraud lives on. A short history of the Real Book. And the importance of prioritising economics over culture wars.

Short thought: Very briefly, because of a hearing earlier today, it’s worth marking the passing of Bernard Madoff, by far the biggest Ponzi schemer ever unearthed.

I say “unearthed” because although all Ponzi schemes have a shelf-life, the numbers in the Madoff scandal were never entirely settled; and the sheer weight of skulduggery around these days, particularly in some corners of the crypto world, does sometimes make me wonder what else is lurking.

As the piece linked to above notes, fraud isn’t a victimless crime. Financial losses are life-changing in themselves, causing despair and sometimes suicide. And the loss of trust is just as damaging. Fraud is corrosive to societies as well as individuals, just as its close relative corruption.

Madoff’s passing is also an excuse, once more, to bewail the UK’s utterly disastrous approach to fraud. We haven’t had a single, big-bang Madoff here. Instead we have huge numbers of victims, losing billions each year to multiple fraudsters via scams which – to be honest – aren’t that sophisticated (often affinity frauds, of the kind Madoff specialised in), and spend (comparatively speaking) next to nothing in investigating and prosecuting them. A disgrace, and one which the Powers That Be remain singularly uninterested in tackling.


Someone is right on the internet: As I’ve mentioned once or twice, I play jazz piano. Note I’m not calling myself a jazz pianist. I’m nowhere near good enough for that. But I try. And I love it.

Anyone who’s ever played and studied jazz will have spent time poring over chord charts of standards old and new. And most of us will have, either on paper or as PDFs, a fakebook or two: a massive tome full of single sheets, with a melody and the chords, for everything from Round Midnight to Chameleon.

I know I do. I’ve even got a couple of fakebooks for specialised areas such as bossa nova. 

But I knew, to my shame, nothing about their background and history. This filled me in. It’s a short read, and points out that fakebooks aren’t without controversy, risking (as some fear they do) the ossification of an in-the-moment art form. But for anyone who’s ever squinted at a chord chart in a dimly-lit club or basement somewhere – trying to keep the line as the atmosphere of the jam fills your soul with a joy and spirit you just can’t get anywhere else and guides your fingers to do things you never knew they could – it’s a good one.


Someone else is right on the internetSimon Kuper, at the FT, is a great writer. Thoughtful, humble, interested and therefore interesting. Even when he writes about football, I’ll read his stuff. And I can’t say that about anyone else.

In today’s FT (paywall – sorry) he makes a point that many have made – but he makes it really well

There are always people who go around missing the main story of their times. No doubt some thought leaders in Paris in 1789 or Petrograd in early 1917 were getting all fired up about sideshows. Something similar is happening now: an obsession with “wokeism” and culture wars at a moment of economic transformation.

By which he means: shouting about culture wars has a huge opportunity cost. The economic damage of Covid, or the benefits of the shift in US economic policy under Biden (which is turning out to be far more progressive than most would have expected), is going to be consequential for everyone.

Meanwhile:

Today’s identity-based point-missing is often deliberate. Every morning, nativist politicians scour the news for a wokeist outrage — in a big world, there’s always one — and then spend the day banging on about it. This is an old phenomenon, explained by the sociologist Stanley Cohen in 1972: a conservative attempt to drum up a moral panic about a group of young people defined as “folk devils”. The “woke brigade” is only the latest in a lineage of folk devils that stretches back through Islamist terrorists, “superpredators” and hippies to early 1960s Mods and Rockers. Rightwingers exaggerated the dangers of all these groups.

Now, Simon is talking about the right-hand side of the aisle. I think the ailment stretches across politics. I imagine he does too, although I agree with his underlying point that the right is generally more effective in using it (perhaps cynically) as a cover for getting on with other priorities while “firing up the base”. 

Me? I’ll continue with my policy of ignoring anyone who decides to push buttons with straw-man terms like “woke” or “gammon” instead of trying to engage.

And keep trying to stop my brain atrophying, by reading people like Simon.


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2021ii3, Wednesday: Getting away with it.

Fraud hurts huge numbers of people, hugely – yet it’s a law enforcement also-ran. When might that change? And, staying with crime, fantastic writing about my favourite detective author of all time.

Short thought: For anyone involved in dealing with fraud – as an investigator, an insurer, a lawyer or otherwise – the past couple of decades have been frustrating beyond bearing. Those 20 years have seen the resources devoted to investigating and prosecuting private-sector fraud dwindle to near-nothing, while fraud grew to half of reported (if not always recorded) crime (as the online environment both created new attack vectors and exposed a huge population of potential targets) and losses estimated by some in the hundreds of billions.

Some blame banks. And they’re not beyond reproach: the schemes set up to repay victims of authorised push payment or APP fraud (where someone bamboozles you into making a payment to the wrong recipient) have been dogged by reluctance, under-resourcing (again) and a tendency by some institutions to pin the blame on the victim far more than may be entirely justifiable

But there’s a fundamental tension here, as exposed in the recent case of Philipp v Barclays Bank [2021] EWHC 10 (Comm). A bank’s primary duty is to carry out its customer’s instructions, not to police those instructions on the off-chance there’s a fraudster behind them. There is a duty to act on reasonable suspicion of fraud or dishonesty; it’s called the Quincecare duty. But it’s of limited application, and (as the Court found in Philipp) doesn’t apply where it’s the customer themself, rather than an agent or someone purporting to act for them, who’s delivering the instructions. The public policy trade-off between the mandated duty and fraud protection is a real one, not something which can simply be refashioned on the fly.

So what about the regulators? Most fraud isn’t undertaken by regulated institutions. No doubt regulators such as the FCA could do more to police the perimeter of their powers – and as Dame Elizabeth Gloster has found in relation to the London Capital & Finance fiasco, it has often been shortsighted at best in how it approaches that task. But it’s not a complete answer by any means.

I’m not sure there’s a simple answer. (Which calls to mind HL Mencken’s maxim: for all complex problems, there’s an answer that’s clear, simple and wrong.) But a recent report by RUSI suggests a re-framing of the problem which I like, and which I think puts the emphasis where it belongs. 

RUSI sees fraud as a national security issue. It takes the UK’s three national security priorities – protecting our people, projecting our global influence, and promoting our prosperity – and points out that fraud does serious damage to all three. It impoverishes and immiserates the people of the UK. It damages our standing by making us seem to be a paradise for untouchable crooks (including substantial involvement by organised crime) and launderers. And it undermines our prosperity by leaching from the public purse and leaving us with a financial system and economy where transactions can’t be trusted. 

Taken together, it posits (I think rightly) that fraud imposes a uniquely damaging disruption not only financially but on society as a while

It suggests what it calls a “whole-of-system” approach, whereby non-criminal justice state actors including intelligence services work together with the criminal justice system to tackle the issue. Unsurprisingly, it calls for significantly enhanced funding – not just for existing specialist forces such as the City of London Police, but nationally. And it makes the case for clearer accountability and leadership.

Of course, you could say we’ve heard this all before. And yes, we have: the 2006 Fraud Review said some of these things, albeit in a different way, and a retrospective 10 years later found little had changed

But the losses are now staggering. Everyone knows someone – a relative, a friend, a business partner – who’s lost sometimes significant sums to fraud. The pandemic has created huge new opportunities for fraudsters. And if the government is even slightly serious about “levelling up”, or “building back better”, then keeping billions in honest circulation rather than in fraudsters’ pockets has got to be a good idea. Aside from anything else, the well-known principle of loss aversion indicates that if someone loses cash to fraud, they’re even less likely to spend what they have left. Not a great help to a pandemic-stricken economy.

And that starts, inevitably, with resourcing it in line with the huge harm it does.

Put more simply: if not now, when?


Someone is right on the internet/things worth reading: I’ve been a sucker for a good mystery all my life. As a kid, I thought Poirot and (later) Miss Marple were the best. Lawrence Block’s Burglar books were a later unashamed pleasure. I haven’t quite read all of Rebus, so I’ve gone back to the beginning and started over before reading the latest ones.

But if you backed me into a corner and said I could only have one detective fiction creator, there’s no contest. Dorothy L Sayers was, is and probably ever shall be the one for me, and Peter Wimsey is my sleuth. Five Red Herrings takes the cliche of train timetables and makes a masterpiece from it; Murder Must Advertise gives us a glorious double life; and Busman’s Honeymoon somehow combines mystery and romance into a piece of sterling literature.

But Gaudy Night is special. The point of view changes to Harriet Vane, initially a secondary character (in Strong Poison) but now a co-star in her own right. And – as beautifully explored in the New Yorker (sorry, paywall – but this could be one of your monthly freebies; it’s worth it) – an exemplar of how Sayers laid the groundwork for today’s flowering of superb female mystery authors. The article’s worth a read. And the books? Just go for it.

(I should also mention the supremely well-done BBC Radio adaptations – all available on Audible, with Ian Carmichaelas Wimsey and Peter Jones, famous among geeks for being the voice of The Book in H2G2, as Bunter. Not quite up to the Sherlock Holmes standard set by Bert Coules with Clive Merrison as Holmes and Michael Williams as Watson – but really, really close…)


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2020i5, Tuesday: Lifting the shell.

Again, it’s a busy week. So two quick hits: a potential AML game-changer, and catnip for Apple geeks.

Short thought: Those who are calling it “groundbreaking” aren’t wrong. One of the more frustrating loopholes (and when I say “loophole” I mean “something the radius of the Channel Tunnel”) in the global anti-money laundering and counter-fraud architecture has long been the ease with which anyone can set up anonymous shell companies in the US.

Congress’s override of Trump’s veto on the US defence bill in the waning days of last year – he’d blocked it ostensibly because it didn’t have anything tacked on to deal with Section 230, the bit of US statute which gives social media services some immunity for website publishers from liability for third party content – also allowed through the Corporate Transparency Act. This, agreed after years of campaigning, makes it mandatory for anyone registering a new company anywhere in the US to disclose the name, address and date of birth of its beneficial (i.e. human) owners, as well as an ID number such as driver’s licence or passport; and for existing companies to produce this info within two years.

No time for in-depth analysis, and obviously the proof is in the pudding – and (thinking of the widespread and largely unpunished abuse of Companies House requirements in the UK) in the enforcement. But campaigners and writers aren’t wrong to call this “the most sweeping counter-kleptocracy reforms in decades” aren’t wrong. Big news.


Someone is right on the internet: For long-term Macheads like me (I’ve owned precisely two Windows devices – a Surface which I resold and a cheap Windows Phone just so I’d know what it was like – and two Androids, a Nexus 4 and a bargain Nokia I’ve since given to a relative, against several dozen Apple devices between me and the missus), Jason Snell’s series on 20 seminal Macs has been a joy. As he’s explained, it’s not necessarily the best machines, but the most notable. And the utterly deserved winner is the iMac G3, the machine that set Apple on the road from mess to megacorp. The whole series is pure comfort food for Apple nerds. Perfect for a New Year’s Day kickback and relax.

(I never owned an iMac G3, although I had one on loan from a client for a while. My personal fave on the list was also the first Mac I ever bought, the PowerBook Duo. I still have one in the house. Time, perhaps, to see if it still boots. Although if it doesn’t, as we found was the case with the – jawdroppingly-beautiful, even 20 years on – family Pismo the other day, it’ll hurt…)


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Lies and freedom. They don’t mix.

“All politicians lie,” so they say. No; all human beings lie. What matters is what lie, when – and what it does to your ability to choose.

I’m a sucker for a series.

By which I mean a sequence of books (for preference) or a good serialised TV show. Genre, of course – you can critique me all you like, but good fantasy/scifi/etc, written with love and care, can’t be beat.

Pratchett’s Discworld*. DS9 – particularly later seasons as the story gained pace. The Broken Earth. B5, of course, and Farscape. Aubrey/Maturin. Rivers of London. And Dresden.

A long-running tale is part of it, to be sure. But the key is writers and creators who let their characters grow and change over time, rather than remain stable as the world shifts around them. It’s a privilege to be part of that.

My problem, particularly with books where there’s been a long gap between instalments – and I recognise this may just be me – is a tendency to want to re-read the whole series before diving into a new one. Which, with the Dresden Files, is taking a while.

Sometimes, though, doing this unearths gems you may have missed the first time round. There’s a couple buried in Ghost Story which hit me squarely between the eyes – and made me think about what I respect, what I despise, and why I make the distinction.

Late in the book – and I won’t spoil it with too much context for the uninitiated – the main character, Harry Dresden, is talking to someone far mightier, but also far gentler, than he. That person’s mission in life is to preserve people’s right to choose, because good and evil mean nothing unless that fundamental human right is preserved. He notes that a particularly vicious misfortune which befell Harry was born of a particularly well-crafted and well-timed lie: convincing him that what was, wasn’t, and making him think he had no choice but to walk down a bad road.

And the character says this: “When a lie is believed, it compromises the freedom of your will.”

That sticks with me. We all lie. Yes, we whinge about politicians doing it – but we all do. Mostly for self-protection. But there are big lies and little lies. And the difference is found not in the extent of the untruth, but in the anticipated consequence.

So a lie designed and intended to sway the world, to destroy the chance to make an honest decision: that’s the lie that’s unforgivable.

Perhaps this is why our profession’s greatest sin is to mislead the court. Sure, represent your client. Highlight the truths that help. Play down those that don’t. Tell the story in the best way for your side – the most believable way. But to mislead the court – even by hiding a relevant authority that doesn’t help – is to rob the tribunal of its chance to make its mind up. It’s not persuasion. It’s a con.

It’s also why I reserve a special hatred for con artists. Sure, I can admire the artistry bit – sort of. But the most successful cons which turn their marks into their best salespeople. Whose self-esteem has been warped by the lies, such that it can scarcely survive if the lies are challenged.

And that inevitably leads me back to politics. As I said, all politicians lie. They’re human. Sometimes to make life easier. Sometimes to protect secrets – whether for fair reasons or foul will depend on the circumstances. Sometimes to protect a confidence.

But outright lies, told to sway and shape opinion, when it’s clear on close inspection that the teller knows perfectly well what they’re doing? That’s treating people as pawns. Playthings.

As marks.

Some thinkers take this further. Harry Frankfurt’s famous essay (and later book), “On Bullshit“, made a distinction between lies on the one hand – where the liar at least placed some value on the truth, prizing it in the act of obscuring it – and bullshit, where the teller simply didn’t care what was true and what wasn’t as long as it served their purpose. It’s a distinction that has been often criticised.

I’m not sure where I stand. I see the distinction, and we do seem to be swimming nostril-deep in particularly noxious and damaging political bullshit in recent years. (Brexit, Johnson, Corbyn, Trump, so many others. Lord, the list goes on. And a special mention for Michael Gove, whose Ditchley speech was an example of extreme – and, I can only conclude, calculated – intellectual dishonesty.)

But I think I care less about the lie-vs-bullshit axis than I do about this question of choice. Whether in politics or people’s personal lives – think of abusers warping the world to rob their victims of a vision of anything different, for instance – robbing people of the freedom to choose feels like the big differentiator.

Dan Davies, author of a wonderful book called “Lying for Money”, put it particularly well, in something he wrote getting on for a couple of decades ago entitled “Avoiding projects pursued by morons 101“. Seriously, read it – it’s not long. But it boils down to three rules, all of which focus on lies and testing them:

  • Good ideas do not need lots of lies told about them in order to gain public acceptance. (If people won’t buy into them without being lied to, that tells you everything you need to know.)
  • Fibbers’ forecasts are worthless. (You can’t mark a liar to market. You can’t hope to fudge their numbers towards reality. If a liar says “this is what will happen”, the only safe thing is to assume the opposite.)
  • The vital importance of audit. (Any time someone won’t let their predictions or their advice get tested against reality, or moves the goalposts mid-game, run. Immediately.)

Put differently: If you catch someone deliberately lying to you, so as to change your mind about something important: that’s it. They’re done. Stop listening to them. Now.

You can accept lies as a fair form of discourse. Or you can – while accepting that we’re human, and so we fail – focus on the right to choose with your eyes open.

You can’t have both. And anyone who favours option one? Don’t trust them. Ever. About anything.

* I’m gradually re-reading the whole Discworld saga. Taking it very, very slow. Essentially to leave till the last possible moment the time when I pick up the Shepherd’s Crown – because it will be the last new Pratchett I ever read. And that hurts.