Blockchain Anti Money Laundering (AML) was introduced because of financial institutions having to comply with anti-money laundering regulations, resulting in increased costs relating to identity compliance. This technology was designed to revolutionise identity security and help to reduce the inflated costs surrounding compliance, as well as simplifying identity protection for financial institutions.
What is blockchain technology?
Blockchains are a ledger – think Excel spreadsheet – that was developed to accept data input or financial transactions from numerous parties. The reason this technology is so innovative and popular is instead of requiring one central authority for transactions to be approved, these require the general consensus of a group for any alterations to occur. Blockchain technology is so revolutionary because it has the capabilities to improve AML by providing a system wide ledger of all institutions that are able to be accessed in real-time, saving law enforcement having to analyse each individual institution’s ledgers separately.
This technology can also identify and eliminate any identity compliance checks that have become redundant, saving financial institutions excessive costs spent verifying customers’ personal details annually.
Why is blockchain technology necessary?
With processes used to manage identities becoming more challenging with the introduction of more applications and platforms, there are more data issues arising due to high profile hacks, which are revealing the vulnerabilities of the systems and processes in place. As many banks spend millions of dollars every year with onboarding, requiring them to gain access to private information on the customers and corporations banking with them, duplication has become a major issue, giving hackers the opportunity to access greater amounts of data. Because blockchain AML technology has the ability to create global digital identities, it alleviates the issue of duplication.
What are the current limitations with blockchain and how could these be fixed?
A current limitation with blockchain technology that has to be overcome is how to store the whole database of each financial institution, while still protecting the privacy of those banking with the institution. To fix this issue, financial institutions would need to incorporate encryption elements in their blockchain technology to protect any personal information, as well as corporate secrets from being revealed.
Is blockchain technology financially viable?
In conjunction with blockchain technology resolving issues with transparency and privacy and enabling faster customer on-boarding and increased compliance, it’s also reducing costs for banks. Because blockchain technology provides a single, streamlined view of all customer reference data, it ensures data security is more efficient and affordable, with one unique point of access. It also eliminates duplication so that less information needs to be analysed by financial regulators, which also lowers additional costs that arise for financial institutions, making this technology financially viable.
To discover more about blockchain AML technology and how it can help your business, contact our team of financial experts at Blockchain Can. As blockchain AML specialists, we stay up-to-date with all the latest innovations and can highlight all the features and benefits this advanced technology offers, to help keep your clients’ personal information secure.