Ever wondered how will the regulatory authorities combat illicit financial activities like money laundering, terrorist funding or drug trafficking, and many more?
Will there even be an end to these activities to such corruption and systematic loopholes that cover fraudulent activities?
Although we can agree that there may not be any drastic changes like this in the near future,
But humans, the progenitor of tools and utility, have the question and the answer to almost every problem.
And in this case, the answer is Blockchain technology. Yes! Believe it or not but this technology has yet again proven its effectiveness in serving utility.
How Does It Help?
Developments show that financial institutions had been heftily penalized by regulatory authorities for not complying with AML(Anti Money Laundering) and KYC(Know Your Customer) requirements.
Also, banking sectors become vulnerable spots for illicit transactions, providing friendly and hospitable situations to offshore accounts. Countries like Colombia, Australia, and many others are under primary concern for money laundering (from archived content)So How does blockchain help in combatting these issues?
Many used to have pessimistic dialogues about this technology limiting it to the magic of bitcoins and nothing else. Until recently where Experts believed that it can help tackle money laundering. To understand this we need to understand the features of blockchain and its simple operations.
Utilizing Blockchain In Financial Institutions
Blockchain is a distributed open ledger and has the ability to record transactions between two parties efficiently in a verifiable and permanent way. The transactions recorded are transparent with tamper-proof digital coding. The database is shared in every node related to that blockchain. Every node has to come to a consensual agreement regarding any change in the database, which makes it foolproof.
Financial institutions are yet to inhabit this technology as they all serve poor operational infrastructure. But this technology is crucial to increase the combative capacities of regulatory authorities against corruption.
Banks and other financial institutions could develop a regulatory team that helps in assessing the recorded data to capture a clean and comprehensible picture of the transactions.
The analytics and figures can help banks get accurately detailed data on wallet addresses. Evaluating this data the risk factor may be dissolved. Transparency of data helps address transactions and enhances the obligation of KYC and AML.
Purpose Of Blockchain
Blockchain technology was designed to gain trust in data and codes when not wanting to trust individuals and institutions. It fundamentally provides anti-corruption measures and the government should inhabit this technology soon with exceptional infrastructure.
It is only a matter of time when Blockchain will be used in the majority of business transactions and culminate numerous speculations that revolutionize our perception of this system. Authorities should be able to culminate the best out of this technology and put it to good use which serves healthy interests.