By Angel Ibanez
UCLA Luskin Student Writer

Public Policy and Electrical Engineering professor, John Villasenor, was recently featured in the media on the topics of selling used digital media and the growing danger of hacked hardware. He also co-wrote a blog post for the Brookings Institute on the role of the global financial system in helping the poorest and most vulnerable.

In the article titled, “Secondhand Downloads: Will Used E-Books and Digital Games Be for Sale?” published by Bloomberg News, reporter Joshua Brustein explained that the mechanics of selling used digital media are not clearly set and possibly not legal. Professor Villasenor offered one potential solution to addressing some of the issues in music: to establish a “short-term online lending library” for songs. 

Through this short-term lending library, the owner of the song would “lose access whenever someone else listened to the song he contributed.” When capitalizing on the song, the recording artist would only be able to “sell the number of copies of a song equal to the maximum number of people listening to it at any one time.”

Popular Science’s “Nowhere to Hide” piece discusses the growing problems that hacked hardware could cause for security in the future. The article references Villasenor’s research in which he stresses the realization that possible attacks are only a matter of time “the laws of statistics guarantee that there are people with the skills, access, and motivation to intentionally compromise a chip design.” This becomes an ever bigger problem when so little is being done to prepare for such a scenario, “defensive strategies have not yet been fully developed, much less put into practice.”

In a blog post co-written for the Brookings Institute last week, Villasenor and Peer Stein discussed how the current rise of “retrenchment by global financial institutions may be undermining years of progress in providing the world’s poor with financial services.”

The problem of retrenchment comes from large fines against banks for failing to comply with international sanctions and anti-money laundering rules. Banks are doing what is known as “de-risking” where they restrict or terminate business with clients to avoid risk. 

This has led to a rise in banks closing remittance accounts and has affected civil society organizations. One NGO involved in helping women’s groups in the Middle East was denied a bank account to avoid the risk of funds indirectly ending up in Syria. 

In order to address this important problem, Villasenor suggested three pillars necessary for finding solutions going forward:

1. Public authorities need to provide more meaningful information on ML/TF risks to the financial industry, clarify their regulatory expectations, and adopt a genuinely risk-based approach in their supervisory and enforcement actions.

2. Financial institutions need to step up their understanding of the risks of their customer base, and direct internal control efforts accordingly. Risk management approaches should focus more on individual clients, and not write off entire sectors.

3. Countries with significant inflows of remittances need to improve the effectiveness of their regulatory regimes to combat ML/TF, and to provide more comfort to global financial institutions with banking relationships with clients in the developing world.