Blockchain Transparency Helps Report Money Laundering Activity

This is the worst way to launder money because there is an immutable audit trail


The transparent blockchain operations used in cryptocurrencies will play an important role in identifying widespread money laundering practices.

Ethikom Consultancy founder and CEO Nizam Ismail said the support allows authorities to trace transactions made on the platform that could dismantle illicit activities.

He cited an example where law enforcement in the United States was able to trace audit flows on a dark web via the blockchain and arrest individuals involved in trading on the platform.

“If you want to do money laundering, this is the worst way to do it because there is an immutable audit trail.

“There is inherent mitigation within the blockchain itself, but other than that, the financial action group that administers anti-money laundering laws around the world has put in place fairly stringent requirements for cryptocurrency that are more prescriptive than conventional currencies, ”he said during ‘a webinar hosted by Maybank Kim Eng titled “Asean New Finance: Crypto Opportunities and Hurdles” yesterday.

He said that many exchanges and intermediaries involved in the operations use sophisticated wallet filters that can track the origin of bitcoin and trace whether it is linked to criminal or ransomware activity.

A report released by the Crypto Council for Innovation, written by former acting director of the Central Intelligence Agency, Michael Morell, found illicit activity among all cryptocurrencies from 2017 to 2020 to be less than 1%.

Nizam also noted that there is considerable use of blockchain in financial services despite the disruption it causes.

He said blockchain could replace intermediaries in the financial system and can be applied in trade finance, insurance systems as well as supply chain logistics, among others.

“Banks or insurance companies can take the middlemen out of their system and put this basket of algorithms to run the business. It’s a mind-boggling but powerful concept, ”he added.

Maybank Group Chief Risk Officer Gilbert Kohnke said financial institutions have yet to fully dive into blockchain awaiting and observing the development of the ecosystem.

Blockchain accessibility issues remain the key area that financial institutions are studying.

“We’re still going to see how it evolves and a lot of that focuses on how the ecosystem develops, who has access to it and who is going to use it.

“There has been some work on this topic and on the applications, but it comes down to the trust network element.

“I think the blockchain is going to reach the general public, but we are still on the sidelines, looking at how we can use it to apply it to our customers,” he added.

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