Big Brother is coming for your data: The Bank of Israel demands to know what you’re buying

The Bank of Israel seems to be heading in the way of becoming a George Orwell style Big Brother to Israel’s citizens, demanding that credit card companies provide it with extensive information detailing consumer behavior, and storing that data in a specialized database. The system will centralize all data detailing every citizen’s spending habits, whether using credit cards, checks, or withdrawn cash as well as how every citizen used their government stipend they received during the recent economic crisis caused by the ongoing Covid-19 (coronavirus) pandemic.

In a letter written by the Chief of Staff to the Governor, Dr. Golan Benita, to all Israeli banks and credit card companies, the Bank asked to receive all citizen data dating back from the past seven years. Following negotiations between financial entities and the Bank of Israel, where banks clarified that they do not retain the data for such a period of time, the sides compromised on a period of five years.

Under Benita’s directives, financial entities must report the following:

All credit card expenses, which will be segmented by activity.

The Bank of Israel explained that credit cards are the main method through which Israelis purchase: “A seven-year length period of time is needed in order to account for seasonal adjustments, and create a ‘forecast’ for how consumer expenses behave were it not for exceptional circumstances.” The Bank intends to understand how much money a consumer spends on pharmaceuticals, education, leisure, food, electricity, clothes, furniture, travel (such as travel agencies, hotels, and flights), restaurants, and gas or other modes of transportation.

All written checks including cash withdrawn from automated teller machines.

“We cannot examine just one or two payment methods from the three existing methods (checks, cash, and credit cards), due to the risk of alternating between different payment methods, which fluctuated during the coronavirus crisis due to fear of contact and other limitations. In addition, in order to examine trends in the payment market, an individual examination is necessary in order to characterize those changes over a period of time, their causes, and attempt to create a model to predict future activity,” the letter reads.

The government stipends.

According to the letter, “this data is needed to measure the changes in private expenditure compared to income, and within the context of a crisis that change in income is the amount of the government stipend. Therefore, it remains crucial to consider the stipend a part of a person’s income, and not for other reasons.”

In total, this is an extremely large amount of information that banks and credit card companies will provide to the Bank of Israel. Once the Bank receives that data it will cross-reference the figures, and a collection of every consumer’s behavior will be given a unique number generated by the Bank, based on every citizen’s personal ID number.

“It’s a bomb waiting to explode”

The Bank of Israel explained that immediately upon entering the data into the database, all personal details will be removed. A person’s name will be deleted as well as their ID number, and be replaced with a special number supplied by the Bank of Israel. Only afterward will it be incorporated with other citizens’ information. Despite that, privacy and information security experts warn that it isn’t that difficult to identify people using such sensitive information, and find to whom it belongs.

The Bank of Israel explained that after receiving the identifying data it will quickly be deleted, although it remains unclear how long it will take to erase those ID numbers. The data could be leaked before the ID numbers are deleted.

Storing data on citizens’ check use and cash withdrawals has raised a lot of criticism due to the fact that the Bank of Israel will be able to trace a customer’s behavior for many years going backward.

Banks and credit card companies have until the end of December 2021 - within another four-and-a-half months - to transfer the data. In Benita’s letter, he wrote: “the data must be protected with the utmost confidentiality at the highest security level, and access will be limited.” He also cited that “the Bank of Israel grants the Governor, with the approval of the Monetary Committee, to establish reporting protocols for financial entities in order to achieve its objectives and perform its functions.”

The Bank of Israel emphasized that it “is aware of the pressure on financial entities to report this data, and will assist those entities to help them complete the task on time. To that extent, we are requesting you appoint a responsible figure who will remain in contact with our sources at the Bank of Israel so that your report and figures will be more efficiently processed into our system. Similarly, we also request that you allocate proper resources necessary for this task.” Banks and credit card companies were offered to coordinate a virtual meeting with bank officials to receive additional explanations.

This isn’t the first database that the Bank has built. Last July, the Bank announced that in order to improve its monetary and financial statistics it had decided to establish an Information and Statistics Department, which will collect statistics on business credit.

The Bank of Israel explained that the coronavirus crisis accelerated the need for data that is necessary for policy-makers to make monetary decisions as well as decisions related to credit for the business sector. Similarly, the crisis increased the need to have an organized database of detailed business credit data in accordance with international standards, and as part of the Bank of Israel’s strategic program. Now, it seems as if the central bank isn’t satisfied with only holding onto the data of businesses, but also wants consumer household data as well.

“It’s good for the economy”

In reaction to the report, the Bank of Israel said: “It is important to emphasize that this database will not include identifying parameters, such as an ID number, account number, etc., which will be deleted immediately after these figures are added to our database and used for research. The figures are necessary in order to build an initial database composed of figures from various sources, and isn’t an ongoing report. Collecting this data from the banking system will be done under the Bank of Israel law, similarly to other acceptable reports that are currently ongoing. This report will be carried out to the highest and strictest standards to protect privacy, just like the existing storage of credit card figures that has been active since 2019. The current project will be conducted under the guidance of the Bank's Privacy Commissioner, the Legal Department, and with the assistance of information security personnel, and the Bank of Israel is also consulting with the Ministry of Justice on the matter.”

“As to the purpose of the database, the Bank of Israel sees inherent value in making policy decisions based on exact figures using big data tools. The need for analyzing these figures relates to a number of issues that remain at the core of the Bank’s activities, and are crucial to achieve goals that benefit the Israeli economy. For example, when a government economic adviser is asked to examine the effectiveness of government assistance programs during the coronavirus crisis; when examining the effect of restrictions on the economy, or when analyzing different populations. In addition, the Bank of Israel and the Ministry of Justice are leading an inter-departmental team to address financial leniencies so that additional groups can receive basic financial assistance to improve their economic standing. Additionally, the database will enable decision-makers to make informed decisions on issues such as cash use, the adoption of different payment methods, and advanced communications with different populations.”