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How banks can embrace Blockchain? Use Cases and Opportunities

Jan 09, 2019

Kapil Poojari

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A recognised leader in their field and ranked among the most influential and regtech companies, Coinfirm serves as a foundation for the safe adoption and use of blockchain.


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The Anti-Money Laundering Chaos...

As technology advances, the potential for money laundering increases. Age old methods of laundering through a wire transfer of funds, private banking, money remittance and money exchange houses, insurance companies, and securities broker-dealers still happen due to non-adherence of AML and KYC policies. According to UNODC the amount of money laundered globally in one year is between 2% and 5% of global GDP, or roughly $800 billion to $2 trillion in current US dollars. A report by the UK’s National Audit Office (NAO) claims that banking fraud is still rising steadily. Anti-Money Laundering (AML) compliance failures amassed $1.7 billion in fines in the first half of 2018 with over $1 billion of that resulting from actions taken by US prosecutors and regulators, according to the 2018 Mid-Year Anti-Money Laundering Review and Outlook report.

Global Banks - AML, KYC, CTF Compliance risks

As per media reports, banks and financial institutions from the US, Canada, UK, Russia, EU Countries, China, Japan, India, Australia and other countries have been fined for violations in Anti-Money Laundering, Know Your Customer and Counter-Terrorist Financing policies, procedures and transactions. We have listed some recent examples below if you wish to read more about a specific bank and understand how complex and deep the compliance and regulation risks are.

  • ING Group - Netherlands’ Largest Bank Fined $900M for Money Laundering
  • Citigroup, - Fined $70 million for AML compliance shortcomings
  • Credit Suisse - Fell short on AML and anti-corruption checks for clients
  • Deutsche Bank - Fined $700 million for inefficient AML processes
  • Standard Chartered - Bracing for a potential penalty of around $1.5 Bn
  • Indian State Banks - Fined ~$138,000 each for failing to report fraud
  • Banks & FIIs - 11 FII’s from China fined $1.55 Million over AML breaches
  • Commonwealth Bank - Aussie FII to pay $700m fine for AML/CTF breaches

It’s time to Embrace Blockchain

Despite all the fines, penalties and the efforts put in by the bank authorities, regulators, customers the AML/CTF and KYC violations has decreased but not stopped. Banks missed a great opportunity in adopting Blockchain technology which would have been an easy, fast and quick-win solution that could prevent all nefarious actions and would save millions of dollars when it comes to operational costs such as IT infrastructure, payment and transaction costs etc. A great value-add and advantage for banks and FII’s in Blockchain is the traceability and irreversibility of transactional records, customer identities helping banks to be compliant and follow AML/KYC and CTF regulations effectively with due diligence and preventing a network effect of money laundering, fraud and other actions. The Coinfirm AML Platform has shown how using big data analytics and algorithms on blockchain can make AML up to 90 times more effective than in the traditional space. There are multiple banks currently exploring using blockchain and cryptocurrencies to create a new paradigm of transparency and AML compliance among other benefits of embracing Blockchain. The growing adoption of cryptocurrency globally has opened huge new business and revenue opportunities for merchants, payments firms to accept cryptocurrencies which means banks will need to address this sooner or later.

Blockchain Use Cases and Future...

It’s a wait and watch situation with banks accepting cryptocurrencies as a lot of it depends on changing government regulations, jurisdiction and business models. The fifth EU Anti-Money Laundering Directive (AMLD5) was recently published. The AMLD5 directive extends the scope to virtual currency platforms and wallet providers, tax related services and traders of art. The directive ends the anonymity of bank and savings accounts, safe deposit boxes and creates central access mechanisms to bank account and safe deposit boxes holder information throughout the EU supported with enhanced mandatory KYC checks. All these changes are great opportunities for financial institutions and banks to embrace blockchain. However it’s exciting to see that even before this directive some banks have taken a leap of faith and explored blockchain technology to co-create unique solutions for their customers. Recently Bank of America the second-largest US bank, has applied for another blockchain patent on the development of a secure crypto storage system. This is a positive sign and a proof that banks also consider cryptocurrency as the future of finance. PKOBP is one the largest banks in Central Europe who integrated Coinfirm’s trudatum blockchain solution to successfully deliver documents to over 5 million customers in a digital format. This is the largest-scale blockchain technology use in banking in Europe. Coinfirm is currently working with a large bank in Japan to integrate a customized trudatum solution.

This is just the tip of the iceberg and a beginning with a wide range of possibilities, innovations waiting ahead to be discovered. If you would like to explore opportunities with Coinfirm please send an email to contact@coinfirm.com

You might also like to read the following Forbes articles written by the CEO of Coinfirm, Pawel Kuskowski.

Banks, ignore blockchain at your peril! It could have prevented the Danske Bank scandal

Crypto Isn't As Risky As It Used To Be, But Regulators Could Still Do More