What Finance Can Tell Us About the Trans Self-ID Debate

Guest Blog by Cyclefree, a lawyer/investigator specialising in financial services and whistleblowing investigations.

Financial scandals have the same features and failings occurring, repeatedly. What is concerning is to see these in a very different setting: the debate over trans self-ID, specifically, the Scottish government’s proposed GRA reforms.

Financial Lessons

At the heart of all scandals are conflicts of interest and self-delusion: believing what you want to be true and fitting facts to your belief.

The City’s 1987 Big Bang abolished restrictive barriers to facilitate competition. What this ignored was the resulting creation of ever larger financial institutions, creating multiple conflicts of interest between institutions, their clients, between clients and between different business areas. Internal Chinese walls tried to manage those conflicts. Self-regulation and — post the Guinness, Maxwell and Barings scandals — light-touch regulation were meant to do the rest. They did not work.

Why? Financiers deluded themselves into believing their own publicity — the myth of “star” traders, that they had discovered a new paradigm which meant that they were now able to manage risk so effectively that they could take more of it on, doing away with previous controls. They thought themselves so essential to the economy they could do pretty much what they liked. Politicians supported them in this delusion because it suited them. Finance lied to itself and others when problems arose: these were the proverbial “one or two” bad apples, not representative, it was unkind to tar everyone else with their brush etc. It did not correctly identify the risks it was running so did not deal with them properly or at all. We are all still paying the consequences (Note 1).

The law was clear enough. But the prevailing culture undermined it. Ethical blindness developed. When law and culture are at odds, it is usually the latter which prevails. Social contagion and conformity are more effective at determining behaviour than the strict letter of the law.

Several dangerous practices resulted:

1. Rules were pushed to their limits, their spirit and intention ignored. “How do we do this?”, “Find me a way to do this”, “Where does it say I can’t do this?” were the questions asked. Few understood the maxim: “Ask yourself not just whether you can do something. But whether you should.”
2. Nor was enough attention paid to the next question: “Why?” / “What are the disadvantages/risks?” The latter were either described as insignificant or manageable or, worst of all, said not to exist. Be very wary indeed when someone tells you that there are no disadvantages to a desired course, especially when this comes from those promoting it. The Mandy Rice-Davies dictum applies here.
3. It became difficult to challenge even when issues arose. In virtually all scandals, there are people who know that something is not right, try to speak up and, if they do so, are ignored. There are other red flags as well, the common factor being that they are usually ignored, minimised or rationalised away. A culture of refusing to listen, of making people scared to challenge or ask “why” will make problems more likely to happen — and likely worse than they need be when they do erupt.
4. Due diligence and verification were meant to be the way problematic issues could be identified. But too often this was not done properly, was seen as a tick-boxing exercise or its results ignored. So it became easy for bad actors to bypass these controls. “I am who I say I am” is the modus operandi of pretty much every financial fraudster there has ever been. Think of Bernie Madoff. Roger Levitt. Robert Maxwell. Ruja Ignatova, the crypto “Queen”. Markus Braun of Wirecard (Note 2). And not just financial — see Jimmy Savile. What they all also do is make it difficult to check their claims: via obscure accounting, layers of offshore companies, legal threats. Or just making it socially unacceptable to challenge or question.
5. Conflicts of interest were either left unaddressed or not properly managed. More often it was assumed that the interests of the banks, its staff and its customers, as well as wider society, were one and the same and, indeed, could not be in conflict. The financial sector forgot that it was primarily there to serve others, not itself. The interests of those affected if matters went wrong were not sufficiently taken into account.
6. More was seen as better. Most financial instruments which led banks into disaster started out as something worthwhile. Credit Default Swaps were originally devised as a means by which banks could minimise their risk i.e., by insuring against a company’s credit-worthiness. Then they came to be seen as products which could be traded very profitably. Rather than minimising risk, they ended up creating huge additional and poorly understood risks.
7. Not just poorly understood but misdescribed — either because it suited those selling the products or because people had persuaded themselves that they were indeed risk free. But just because something is described as risk free does not make it so. What something is called does not change underlying material reality.

Much has changed in recent years. The focus is on properly identifying, understanding and managing risks, closing loopholes (if one exists it will be used), on trying to avoid the creation of conflicts of interests and, where these are inevitable, managing them properly.

There have been two important changes above all:

• Creating a culture of speaking up about problems before they become crises to be managed.
• Understanding that you cannot simply trust but must also verify. The level of verification needed is based on the assessment of the risk to and vulnerability of those affected by any failings. But the requirement is for more verification. Not less. And definitely not none at all.

There will always be bad actors. To think otherwise is naïve. And dangerous. Trying to root them out is playing Whack-A-Mole. But that steps must always be taken to prevent the former operating and risks becoming real are not in doubt.

GRA Reform

The debate is centred on trans people and their human rights, without ever stating what rights are missing. It assumes: (1) anyone should have the right to change gender; (2) only the needs of those wanting to do so are relevant. What is not asked is ask why anyone should. Nor whether everyone should. Nor what the impact on others may be.

The reform removes the requirement for a medical diagnosis (partly because of long delays getting one). Anyone over the age of 16 born or living in Scotland can change gender by making a self-declaration — with no verification of any kind. This is presented as a simple upgrade rather than a fundamental recasting making it something very different. (It is the equivalent of turning an obscure product designed for a limited purpose into a highly risky instrument traded by those whose motives may be self-serving or malicious.)

It repeats finance’s most serious mistakes:

• Creating a loophole and an unmanageable conflict of interest by short-circuiting the process.
• Abandoning any verification. The assumption is that no-one will ever lie or act maliciously or misuse the process for an unintended purpose.
• Believing that a favoured group can be automatically trusted and allowed to behave freely without any controls.

Both of these are dangerously misguided, unsafe assumptions which do not survive a moment’s contact with reality.

• Stating what you would like to be true (“Transwomen are women”) and assuming that changing a description changes reality. A man calling himself a woman but with a male body is self-evidently not the same as a woman with a female body. Legal nomenclature says nothing useful about risk.
• Convincing yourself that there are no or few risks and so not identifying them accurately and ignoring or minimising any evidence or concerns suggesting otherwise.
• Not assessing the impact on those likely to be harmed if matters go wrong.

The consequences are similar:

• Substituting one value at the expense of others, equally important. The City’s “golden goose” revenues were extremely attractive. The costs of its behaviour, costs now being paid, were ignored. Now “inclusivity” is all important, with little regard for who might be included and who might thereby be or feel excluded. Safeguarding — which necessitates excluding some by discriminating on the basis of risk — is undermined.
• Challenge and scrutiny are not only not encouraged but viewed with distaste and alarm. See Ms Sturgeon’s statement that objections are “not valid” — even before any consultation process has started. Seeking to rely on existing legal single sex exemptions is seen as offensive, phobic or bigoted. How they are to be preserved if self-ID happens is not explained.
• The possible impact on others is not considered. Gender reassignment does not require surgical intervention. Since it will be available to any man or boy older than 16 virtually on demand, it means that there will be men legally treated as women retaining all the physical attributes of men. Since no verification that such men have dysphoria will be needed, any risk assessment should assume that the process could be used by those without dysphoria or with malicious aims.
• This has not been done. The impact on women and girls as a class in the round is simply not considered. The risks are hand waved away; any evidence of risks (Note 3) or current research into what the risks might be are ignored or misinterpreted (Note 4).
• Instead, the Scottish government announces that such risks cannot exist. See Shona Robison, MSP and Equalities Minister responsible for the proposed Bill in Holyrood on 3 March 2022:

“There is no evidence that predatory and abusive men have ever had to pretend to be anything else to carry out abusive and predatory behaviour.”

This is an extraordinarily ignorant statement. If there is one thing we know about sexual predators, it is that they will use whatever loopholes and opportunities exist, including pretending to be what they are not. Ample evidence confirms this (Note 5).

This statement is a classic example of saying what you want to be true, what you have to believe to justify what you want to do. It assumes both that trans people, as a group cannot, by definition, contain bad actors and that bad actors will never abuse a loophole or pretend to be something they aren’t. It is not a statement of fact. But of belief. It is self-delusion on a colossal scale.

This self-delusion — both about the nature of the reform and the absence of risks arising from it — bakes dishonesty from the start into the proposal and consultation process. That lack of honesty — about what you are doing, about the harm that has been caused and the potential risks, about the need to balance the rights of different groups, about the need to protect the most vulnerable if matters go wrong — means that, eventually, just as in finance, problems will arise.

But their cost will not be counted in money but in real harm to women.

Notes

Note 1: For a fuller description of City behaviour see http://www2.politicalbetting.com/index.php/archives/2017/01/20/cyclefree-asks-are-banks-the-new-unions/

Note 2: The FT’s account of the Wirecard scandal is riveting: an example of a fraud, whistleblowers and the extraordinary legal and other lengths the fraudsters went to to stop the FT’s investigation, aided by the German regulators who did not want to believe that their “superstar” digital bank was less than it seemed.

Note 3: The Cass Independent Review of Gender Identity Services for Children and Young People is at Cass Review — Independent Review of Gender Identity Services for Children and Young People (independent-review.uk). Its interim report was published on 10 March 2022.

Or see https://www.thetimes.co.uk/article/sex-offenders-free-to-abuse-children-after-changing-id-bpdlx59p0.

See also paragraphs 13 and 14 of the High Court judgment on the lawfulness of the policy allowing transgender women convicted of sexual or violent offences against women to be housed in a women’s prison — https://www.bailii.crg-bin/format.cgi?doc=/ew/cases/EWHC/Admin/2021/1746.html&query=(4198/2019. This sets out the information as at 2019 as provided by the Ministry of Justice.

Note 4: See the submission to Parliament’s Women’s Equality Committee about Swedish research into offending patterns in transgender women prisoners who have surgically transitioned — https://committtees.parliament.uk/writtenevidence/18973/pdf/

Note 5: See IICSA reports — Reports & recommendations | IICSA Independent Inquiry into Child Sexual Abuse