Does Secrecy Help Protect Personal Information?
This essay appeared as the second half of a point-counterpoint with Marcus Ranum. Marcus's side can be found on his website.
Personal information protection is an economic problem, not a security problem. And the problem can be easily explained: The organizations we trust to protect our personal information do not suffer when information gets exposed. On the other hand, individuals who suffer when personal information is exposed don't have the capability to protect that information.
There are actually two problems here: Personal information is easy to steal, and it's valuable once stolen. We can't solve one problem without solving the other. The solutions aren't easy, and you're not going to like them.
First, fix the economic problem. Credit card companies make more money extending easy credit and making it trivial for customers to use their cards than they lose from fraud. They won't improve their security as long as you (and not they) are the one who suffers from identity theft. It's the same for banks and brokerages: As long as you're the one who suffers when your account is hacked, they don't have any incentive to fix the problem. And data brokers like ChoicePoint are worse; they don't suffer if they reveal your information. You don't have a business relationship with them; you can't even switch to a competitor in disgust.
Credit card security works as well as it does because the 1968 Truth in Lending Law limits consumer liability for fraud to $50. If the credit card companies could pass fraud losses on to the consumers, they would be spending far less money to stop those losses. But once Congress forced them to suffer the costs of fraud, they invented all sorts of security measures--real-time transaction verification, expert systems patrolling the transaction database and so on--to prevent fraud. The lesson is clear: Make the party in the best position to mitigate the risk responsible for the risk. What this will do is enable the capitalist innovation engine. Once it's in the financial interest of financial institutions to protect us from identity theft, they will.
Second, stop using personal information to authenticate people. Watch how credit cards work. Notice that the store clerk barely looks at your signature, or how you can use credit cards remotely where no one can check your signature. The credit card industry learned decades ago that authenticating people has only limited value. Instead, they put most of their effort into authenticating the transaction, and they're much more secure because of it.
This won't solve the problem of securing our personal information, but it will greatly reduce the threat. Once the information is no longer of value, you only have to worry about securing the information from voyeurs rather than the more common--and more financially motivated--fraudsters.
And third, fix the other economic problem: Organizations that expose our personal information aren't hurt by that exposure. We need a comprehensive privacy law that gives individuals ownership of their personal information and allows them to take action against organizations that don't care for it properly.
"Passwords" like credit card numbers and mother's maiden name used to work, but we've forever left the world where our privacy comes from the obscurity of our personal information and the difficulty others have in accessing it. We need to abandon security systems that are based on obscurity and difficulty, and build legal protections to take over where technological advances have left us exposed.