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This is not a "SEX, and now that I've got your attention..... " piece, but a simple users assessment of some of the interesting features of the Internet and its ability to make information, ( both true and false ) available internationally.
First of all it is important to recognise what the Internet does, and does not do. It transfers information, it does not transfer materials.
This is interesting because it has a number of implications that Governments have not really grasped:-
1) If a good or service is pure information it can be offered from anywhere in the world.
2) If they can accept Barclaycard , VISA etc. as payment then the location of the purchaser is irrelevant, ( a situation that Ecash will enhance by making transactions anonymous).
3) The location of the information source and merchants account need not be in the same country.
The effect of these three features is to allow an information service to operate out of a jurisdiction that allows its service, and supply and bill customers all over the world.
Jumping on the bandwagon and looking at pornography we see that if you wanted to sell all you need to do is set up a server in say Holland, and wait for the money to roll in. At present this is not a reality, and current bandwidth limits mean that it will remain impossible for some time, until good quality video can be downloaded over the Net. ( Though already companies that sell physical tapes are offering taster clips for free ).
I have spoken with some policemen who are connected to the Net and it is their view that the UK rules should be liberalised as to have no law is better than one which is unenforceable. I.e. accept that pornography in the privacy of the home does no harm, ( or at least less harm than making a lot of people criminals but not prosecuting them, thereby bringing the law into disrepute).
In short the only pornography that will remain unavailable on the net from a public source will be that unacceptable in all countries. At present this means that only kiddie porn will stay off.
( You may wonder about pervert groups with email and encryption. I am looking at legitimate public servers that people will surf into. Perverts will use the net like a postal service, but outsiders will not stumble upon their material).
So are people right to be worried about the spread of porn on the Net? If they think porn is a "bad thing" then yes, their worst fears are quite correct. Is there anything they can do about it? No, not unless they can persuade the US, Holland, Denmark, Thailand, Germany, Sweden and other places to rewrite their morals laws. Apart from that the only option is moral suasion so that people decide they don't want to view it.
The other bugbear of the worrying classes is the spread of bomb making ability to terrorist groups, using information on the Net.
This is a red herring because the information needed by anyone who wants to build a bomb etc. is already widely available, ( your local University library will have everything you need to know either within it or by interlibrary loan ). Terrorism began way before the Internet, and finding the "how to" was never a problem.
To use the information to build the bomb needs the expertise to apply it, and the materials to build with. Terrorism is a logistics game in which the bottleneck is always sourcing the supplies, ( or the money, same situation ), not finding the information or people who can use it. ( Most people with a scientific background can design a conventional or even nerve gas bomb, given a few months on the project ). The Internet does not transfer material, you still need trains, planes and automobiles for that, and that is where the monitoring needs to be.
It might be argued that potential suppliers of restricted material will use the Internet to find buyers. This is unlikely as the Internet is too open and any sales attempt would leave the supplier subject to targeting by enforcement agencies. Once buyers and sellers are in touch then email etc. will be used, but the Internet itself does not increase the problem given that faxes, phone calls and post already exist.
In short, for areas which involve the transfer of actual materials the Internet will only ever have a small impact, and local governments can still enforce rules at a national level. ( Though if those rules vary enough to produce anomalies you get smuggling and abuse, such as the massive importation of alcohol from the Continent.)
What have Financial Services got to do with porn and bombs you may ask? The answer is that a little thought shows that they are fundamentally information businesses, and while material items are involved they are simply policy documents, and as such could be replaced in due course as digital signatures and encryption systems grow in use. ( The scenario is one where the document is sent by email, with a digital signature to show that it is yours and yours alone. Users would store it on disk, perhaps printing out a couple of copies as a backup.).
As we have seen with porn this means that any service can operate out of any location to deal with clients anywhere in the world.
Although most countries have safeguards that impose rules on financial services companies that wish to sell, the Web approach bypasses all these as no national infrastructure is needed. This lack of official authorisation would prevent the sale of some contracts, ( esp. those that need to offer local tax advantages ), many fundamental areas would be open. E.g. simple investment schemes like share dealing and unit trust sales, and life insurance.
The implications for the UK Financial Services industry are clear.
An offshore company could market via the Web, ( thereby being able to declare that the product was bought, not sold ), and in doing so side-step all the rules and expenses that are involved with basing yourself in the UK.
Regulations concerning fit and proper people, rules about handling money, declaration of charges, declaration of commission, rules governing advertising projections and performance descriptions, compliance and reporting requirements, statutory contract terms, are some of the areas that the offshore web site can ignore.
This can be seen to be a boon to the honest company wanting to offer value for money, who knows how to market on the Internet. All the entrepreneur needs is a computer tacked onto the server plus a fund manager and he can take on the biggest and the best in the industry from an expenses base they can only dream of.
Would such an operation be illegal? Well it would certainly be illegal to have the server in the UK, but if the site was outside the EC it seems that the UKs government takes the view that no crime would be committed. ( The Web site is not UK advertising because to see it you are deemed to have gone of own free will. It is like being given a number in a tax haven, dialling and buying. No crime committed by the company, no protection offered to you )*. IMO this is asking for trouble as it puts the onshore provider at a huge disadvantage, and invites a massive outflow of investment.
The prospects for the fraudster are even more wonderful. In a regulation free environment no crimes occur until the scheme collapses, and schemes that collapse in small easy to bribe administrations are probably going to be called corporate failures rather than fraud. Think about this as a possibility:-
An investment company is set up by a Director who puts into the rules that 50% of all first years premiums are commission due to the marketing company, ( him ), and he runs a Web site out of the Cayman Islands, where he also bases the company. He controls the server using encrypted commands from wherever he is at the time. ( He may be on his yacht, in one of many rented villas etc. ). The fact that he owns and controls the companies is hidden by the secrecy laws. After a year or two his marketing company serves notice of default on the investment company for failing to forward the right amount. The investment company is wound up and investors money, ( apart from the commissions ) returned. It is possible that no crime would be committed by this scheme, and even a Ponzi version might be safe.
IMO the only effective approach is to deregulate marketing of policies, allowing the market to wipe out those that have high charges, and concentrate the regulation on ensuring that companies are liquid. This would remove the marketing advantage to be derived from going offshore, and while offshore would still offer cost advantages, this gap would be reduced. It would be hoped that by correct advertising the onshore companies could play the strength regulation to their advantage, thereby overcoming this problem.
( The other "regulate the Internet " approach will fail because such schemes will simply be set up by people who do not intend to visit the UK)
If the UK grasps this nettle it could grab a lead in the potential of the Internet for this whole market sector.
Copyright Ian Dickson 1995 Non commercial distribution allowed Postscript Nov 1995. The SIB and PIA are getting their act together. While the issues are still valid, the detail in the above is rapidly becoming out of date. Contact me for current assessment.
*No longer true, 19/6/96. Current view is that anything that can be accessed from UK is caught by UK law. Enforcement however is a very different kettle of fish.