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SuperFreakonomics Book Club: Can a Banker's Algorithm Help Catch Would-Be Terrorists?

The SuperFreakonomics Virtual Book Club invites readers to ask questions of some of the researchers and other characters in our book. (Earlier Q&A’s can be found here.)
This week we’re offering up “Ian Horsley.” By day, he is employed in the anti-fraud department of a large British bank; but in his every spare moment for the past few years he has been working hard in collaboration with Steve Levitt to build an algorithm that can identify potential terrorists by their retail banking data. A few excerpts:

He doesn’t work in law enforcement, or in government or the military, nor does anything in his background or manner suggest he might be the least bit heroic. He grew up in the heart of England, the son of an electrical engineer, and is now well into middle age. He still lives happily far from the maddening thrum of London. While perfectly affable, he isn’t outgoing or jolly by any measure; Horsley is, in his own words, “completely average and utterly forgettable.”


The procedure [to build the algorithm] would require two steps. First, assemble all the available data on these hundred-plus suspects [already arrested by British police after the 7/7 bombings] and create an algorithm based on the patterns that set these men apart from the general population. Once the algorithm was successfully fine-tuned, it could be used to dredge through the bank’s database to identify other potential bad guys. Given that the United Kingdom was battling Islamic fundamentalists and no longer, for instance, Irish militants, the arrested suspects invariably had Muslim names. This would turn out to be one of the strongest demographic markers for the algorithm.


There were also some prominent negative indicators. The data showed that a would-be terrorist was disproportionately unlikely to:
Have a savings account
Withdraw money from an ATM on a Friday afternoon
Buy life insurance
The no-ATM-on-Friday metric would seem to be a proxy for a Muslim who attends that day’s mandatory prayer service. The life-insurance marker is a bit more interesting. Let’s say you’re a twenty-six-year-old man, married with two young children. It probably makes sense to buy some life insurance so your family can survive if you happen to die young. But an insurance company may not pay out if the policyholder commits a suicide bombing. So a twenty-six-year-old family man who suspects he may one day blow himself up may not waste money on life insurance.


As of this writing, Horsley has handed off the list of 30 to his superiors, who in turn have handed it off to the proper authorities. Horsley has done his work; now it is time for them to do theirs. Given the nature of the problem, Horsley may never know for certain if he was successful. And you, the reader, are even less likely to see direct evidence of his success because it would be invisible, manifesting itself in terrorist attacks that never happen.