SBA

Panama’s Dodgy Manx Data

Do you know how many customers you have? For many businesses the answer will be no, because they trade through intermediaries, or no, because customers may have multiple accounts, or no, because it’s a cash business.

Data is funny stuff. It means different things to different people in different contexts. We interpret data differently depending on our context, you and I may look at the same data and derive very different conclusions. This is why we have GAAP and IFRS for corporate accounting, without consistency of processing the same set of data yields different answers to different users, and like for like comparisons between sets of data becomes meaningless. I’ve lost count of the times I’ve heard managers whining about dodgy data, only for it to emerge that the data was fine but their processing of it was inconsistent, undisciplined, ad-hoc, and frankly amateurish.

Last week we were flooded with data, when the ICIJ published the data extracted from the Panama Papers. Journalists, Socialists, Tax Campaigners et. al. around the World are bleating on about the headline numbers. In the Isle of Man, we learned, the papers contain “4,983 offshore entities, 2,018 company officers, 213 intermediaries and 1,171 addresses linked to the Isle of Man”. Tax authorities and financial regulators abroad are probably rubbing their hands with glee.

The headlines are not quite true. Firstly the ICIJ Offshore Leaks database is not merely the Panama Papers, it also contains the data collected from earlier leaks published in 2013. Then once we start analysing the data there are substantial duplications, for instance under Officers instead of around 2,000 Isle of Man Officers there are really only about 800 associated with the Panama Papers after cleansing and de-duplication, and most of these are Corporate Officers which are subsidiaries of CSPs. The 1,000 addresses is similarly stretching the truth, after cleansing the sum total of addresses for the Entities connected to IoM is about 250, the total of all addresses including addresses of Officers and Intermediaries is c. 600 - and some of these are abroad, The c. 50% discrepancy between the news headlines and the truth  is dodgy data. The Panama Papers include a mere eight Isle of Man registered entities.

Whilst the underlying data may be OK, the way in which it has been assembled by the underpowered team of three ICIJ technicians is misleading at best. It is easy to search the data for names, but not so easy to draw reliable conclusions from it. Instead of giving an accurate picture of the involvements of an Officer, or Intermediary, or Address, it gives us a group of fragmented views; there may be for example six entries for an officer, each revealing a part of their connections - and no way for anyone to draw an accurate picture without downloading the raw data from the ICIJ and re-processing it to generate “Truth”.

This reflects a common problem seen in many corporate databases; amateurish construction and maintenance of data, lack of cleansing and de-duplication, failure to process in a consistent and standard manner etc. mean that data is not what it seems and valid information cannot be generated. Just as many businesses cannot actually answer the question of how many customers they have even though they trade with those customers directly, because of duplicate accounts, and accounts for different departments of the same company and branch offices etc., without professional re-processing the Offshore Leaks database can’t tell us how many Officers or Addresses in the Isle of Man are associated with the Panama Papers.

Mud sticks however, so despite it being totally untrue, the world will think the Isle of Man has around 2,000 Officers associated with dodgy dealings in Panama, which is most of our CSP sector. The damage is done.

The problem of dodgy data is pretty universal, and it has an adverse effect on organisational performance because decision-makers are misinformed. It is expensive to clean data and expensive to maintain it properly. Producing accurate results is a distinct and demanding skillset, with the result that much of the so-called information we see in business is produced by amateurs; for example in one case I saw the Sales and Operations people in a company produced their own reports, and the inaccuracies only came to light when the MD queried why Sales thought they had 40,000 customers when Operations were only servicing 27,000 of them.

Amateurs handling data can have serious consequences, for business strategy, and occasionally for reputation. Many of us have at times derided Government statistics. Getting to a Single Version of Truth requires discipline and consistency of method. One of the latest recruitment fads is Data Scientists - people who can actually process data intelligently, accurately and consistently (we used to call these specialists Reporting Analysts, but perceptions of the role have been upgraded as the paychecks required to attract the best have inflated).

Nevertheless we almost all have these amateurs handling data, and producing dodgy results. Unless an organisation has a ruthless Head of IT or Chief Information Officer who insists on monopolising the professional production of reports, it is likely that the only reliable information in an organisation is the Accounts, and their scope is very limited.

I recently received an email to my Management Consulting company, SBA Limited, from the Isle of Man Financial Services Authority (the FSA), the combined regulator which has replaced the Financial Supervision Commission  and the Insurance & Pensions Authority. The email read “You are receiving this correspondence because it would appear that you may be undertaking, or holding out as undertaking the business of a Virtual currency provider, a designated business as defined in Schedule 1 to the Act.”. The missive from the regulator went on to say “If you have not already done so, will you please review your activities against the Act as a matter of urgency and advise us of your conclusions.  If you believe yourselves to be exempt or outside the scope of the Act please set this out in the form of a breakdown of the activities that you perform in respect of any customers on whose behalf you act, in or from the Isle of Man.”.

To say that I took umbrage would be a magnificent understatement. Here was some public servant maligning my company, and therefore me personally as its sole worker, as unlawfully operating a Virtual Currency business; perhaps dealing in untraced dodgy cryptocurrencies best known for facilitating unlawful trade in drugs and guns - and demanding that I go to the significant effort of explaining exactly what my business does in order to show that my Management Consulting activities did not fall within the scope of the act.

I telephoned the FSA demanding to know from where they had got their information, and was told it was “in their records”. In short they had put SBA Limited into an official list or database. I asked why they had included me in their records, and they claimed they had read it in SBA’s website. SBA’s website offers my services as a “Virtual Chief Information Officer”, and my expertise in “Virtualisation” (the hosting of many computer servers on one physical computer), nowhere does it mention Virtual Currencies. I can only assume that some blundering bungling bureaucrat working in the FSA has been trawling through Isle of Man business websites and cannot tell the difference between a six-foot two inch male, balding IT expert and a cryptographically encoded chunk of data purporting to carry information about a value transfer transaction. Thus SBA was included within the FSA’s dodgy data and I was harassed under implied threat of regulatory sanction to explain myself for our non-breach of the DBRO Act.

It would seem that some of the FSA’s amateurishly and unlawfully compiled records have no more integrity than the ICIJ’s Offshore Leaks dodgy database of stolen data. There is probably truth to be found in both of them, but both can also be used to draw dangerous conclusions in the hands of amateurs.

Personally the prospect of the Panama Papers dodgy data in the hands of the blundering bureaucrats employed by Regulators and Tax Authorities worries me deeply as the combination is guaranteed to waste huge amounts of taxpayer’s money whilst harassing many innocent people.  Processing data is a job for professionals, unfortunately dodgy data is everywhere and unless the reckless amateurs who produce it are sat upon hard it damages governments, businesses and individuals.

For the sake of disclosure, I do have an interest in Virtual Currencies, which is nothing to do with SBA Limited so wrongly maligned by the FSA. I  am the inventor of a digital currency acceptance mechanism for vending machines. If the FSA had the nous to ask me about that I would have been able to tell them that my invention is outside the scope of the DBRO Act because I have merely created a machine for others to use; it’s not for sale (yet) and I don’t get to touch the filthy lucre myself. Nevertheless, if virtual currencies ever go big for consumer payments I could be coining it in.