Enforcement Creates Trade Barriers, Fails to Stop Crooks

The use of spam and other nefarious IT-enabled practices is an increasing problem on websites that incorporate social media components, as discussed on Google Webmaster Central:

http://googlewebmastercentral.blogspot.com/2009/06/spam20-fake-user-accounts-and-spam.html

Tools such as CAPTCHA systems that are designed to discourage spam accounts have proven largely ineffective against organized (commercialized) marketing campaigns।

A good deal of the CAPTCHA circumvention (via keypunching) and other spam enabling activity occurs in India, where spammers contract on a per-line basis to outsourcing service providers। These same providers commonly experience a variety of compliance problems in doing business in the U.S., but are immune from negative sanctions by the nature of compliance systems in the U.S.

The current enforcement system puts the burdens on state governments to go after outsourcing service providers that operate illegally or without registering with appropriate state authorities.
The current enforcement system works well to stem the type of fraudulent practices that were prevalent during the era of the Pony Express। Its ability to respond to transnational online fraud? Not so good.

In a survey that I conducted of state enforcement offices, I found that even in the states with the toughest provisions, government personnel were largely uninformed about their responsibilities and authority।

I’ve proposed that the National Governors’ Association and National Association of State Attorneys General help states to update and coordinate their compliance and enforcement activities, but there is scant interest in doing so। This is unfortunate because the end result often involves substantial financial losses for American consumers. The elderly are frequently targeted for online fraud.

Improving compliance tools would help legitimate businesses and cut the costs of compliance। It would increase protections for U.S. consumers and increase public confidence in legitimate online business offerings.

In the face of resistance from the states and indifference on the federal level, one option for reducing online crime in the U।S. would be for a foreign government to bring suit against the U.S. for trade barriers. It costs about half a million dollars to market some types of products and services in the U.S. (particularly products and services with a financial component) in compliance costs on the state level. The CAPTCHA-busting folks don’t bother to pay. Many law-abiding companies cannot afford to pay and see the current compliance system as a barrier to trade.

A suit would be appropriate because the barriers are created on the state level।

For additional information, see:
http://tr.im/Compliance