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BLOCKCHAIN FOR AML Harnessing Blockchain technology to
detect and prevent money laundering
Blockchain-based system using s...
NGT Ventures LLP
2 The global impact of money laundering is staggering; with
related transactions estimated at 2 to 5% of ...
NGT Ventures LLP
3 Aging AML solutions are inadequate to meet today’s
business challenges and unprepared for tomorrow’s ne...
NGT Ventures LLP
4
While blockchain technology is today predominantly being used within the ‘fintech’ context , organizati...
NGT Ventures LLP
5
Input subset of
transactions
Alert, Record
A Blockchain-based system with smart contracts (using in-bui...
NGT Ventures LLP
6 The decentralized system will compliment existing AML
applications adding an extra ring of scrutiny & v...
NGT Ventures LLP
7 The Result: A next-gen AML solution ready for today’s complex
financial environment and tomorrow’s evol...
NGT Ventures LLP
8 Institutions have the potential to leap-frog peers and lead the
way in smartly detecting and preventing...
NGT Ventures LLP
9 Learn how you can harness Blockchain technology to
detect and prevent money laundering
Drop us a line o...
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Blockchain for Anti Money Laundering (AML) Transaction Monitoring

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Harnessing Blockchain technology to detect and prevent Money Laundering (AML) and Trade Finance Money Laundering

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Blockchain for Anti Money Laundering (AML) Transaction Monitoring

  1. 1. BLOCKCHAIN FOR AML Harnessing Blockchain technology to detect and prevent money laundering Blockchain-based system using smart contracts (with in-built algorithms) Tamper-Proof records for current assessment and future analysis Distributed ledger for regulatory oversight & inter-institution collaboration
  2. 2. NGT Ventures LLP 2 The global impact of money laundering is staggering; with related transactions estimated at 2 to 5% of global GDP 36% of organisations report being victimised by economic crime Fraudulent misinvoicing of trade transactions is a key component of illicit fin. flows Compliance-related expenditures have risen by more than 50% over the last three years Rising visibility linking money laundering to global terrorism financing, trafficking, etc Every year, roughly $1 trillion flows illegally out of developing and emerging economies due to crime, corruption, and tax evasion— more than these countries receive in foreign direct investment and foreign aid combined Every year money laundering channels around $2 trillion worth of proceeds from various illicit activities. Less than 1% of global illicit financial flows are currently seized by authorities Source: UNODC, IMF, Global Financial Integrity, Accenture, KPMG
  3. 3. NGT Ventures LLP 3 Aging AML solutions are inadequate to meet today’s business challenges and unprepared for tomorrow’s needs Despite spending billions of dollars on AML solutions, financial institutions and regulators continue to face an uphill battle in the fight against money laundering Existing transaction monitoring systems, based on traditional technology, are unable to keep pace with growing data sources, volume and complexity of transactions Growing wave of new digital financial services and cryptocurreies Silo’d programs with very limited inter-institution collaboration Lack of smart automation, analytical capability and visualization Absence of integrated planning and data management
  4. 4. NGT Ventures LLP 4 While blockchain technology is today predominantly being used within the ‘fintech’ context , organizations - both public and private- are starting to look at use cases beyond financial services How a blockchain works ImmutableCryptographically Secure Blockchain Consensus driven Open source value transfer protocol Distributed P2P network Secure math-based system Decentralized The first electronic value transfer protocol A wants to send money to B The transaction is represented online as a `block’ The block is broadcast to every party in the network Those in the network approve the transaction is valid The block that can be added to the chain, which provides an indelible and transparent record of transactions The money moves from A to B 1 2 3 4 5 6 Key features of Blockchain technology Blockchain technology, by its very nature, lends itself to integrated decentralized monitoring efforts of financial transactions The blockchain, a cryptographic ledger comprising of a digital log of transactions shared across a public or private network, can address many of the pitfalls of existing transaction monitoring systems
  5. 5. NGT Ventures LLP 5 Input subset of transactions Alert, Record A Blockchain-based system with smart contracts (using in-built algorithms) can help identify and stop suspicious transactions The distributed system will allow financial institutions to securely parse data through an AML/TFML engine on the blockchain; with the automation providing high efficiency and ensuring minimum friction A Blockchain-based platform will give regulators, auditors and other stakeholders an effective and powerful set of tools to monitor complex transactions and immutably record the audit trail of suspicious transaction across the system Regulator & N/W Mgmt.Central Bank Bank A Bank B Bank / Clearing HouseBank / Fin. Exchange AML App & Blockchain Node AML App & Blockchain Node AML App & Blockchain Node AML App & Blockchain Node AML App + Blockchain Node AML App & Blockchain Node Private Permissioned Blockchain Network Network Directory & AMLSmart Contracts  Automated, quick and effective  Improved accuracy  Immutable logs and audit trail  Transaction/payments  Customer profile data  Patterns  Other details 1 3 Input data. Invoke smart contract • Alert stakeholders • Flag and stop payments • Record/Log Details ! Monitor, Analyze 2
  6. 6. NGT Ventures LLP 6 The decentralized system will compliment existing AML applications adding an extra ring of scrutiny & visibility The distributed ledger based platform will allow one institutional system to alert another of transactions that could potentially be fraudulent and require further scrutiny Being cryptographic-ally secure will ensure credibility while the immutability feature of Blockchains will maintain tamper-proof records for current assessment as well as future analysis Key Features * 1. Private Permissioned Blockchain network 2. Distinct roles for banks, regulators, exchanges and other users 3. Distributed system for confidentiality, resiliency, and scalability 4. Cryptographically secure – encryption/decryption for visibility to only entities linked to a transaction and authorized auditors/regulators 5. Auditing at multiple levels. 6. Logs immutably recorded, providing a single version of the truth with a complete audit trail of (suspicious) transaction across the system* Adapted. Based on the Hyperledger Fabric Blockchain Define contracts. Monitor transaction NodeNode Node Node Node Node LedgerofRecords Ledger Ledger Ledger Ledger Ledger Ledger Input transaction. Invoke contracts Blockchain N/W Management Blockchain Network Regulators Central Bank Other auditors Banks Other Financial Institutions
  7. 7. NGT Ventures LLP 7 The Result: A next-gen AML solution ready for today’s complex financial environment and tomorrow’s evolving needs Additionally, the blockchain-based system will also provide an ultra-secure platform for information sharing among the participating institutions Distributed for scalability and resilience - to keep pace with the growing data sources, volume and complexity of transactions Immutable & Tamper-Proof logs - stored securely on the Blockchain for current assessment and future analysis Integrated - allowing one institution’s system to alert another of suspicious transactions Highly effective monitoring of suspicious transactions - reducing the large number of false positives with minimum friction
  8. 8. NGT Ventures LLP 8 Institutions have the potential to leap-frog peers and lead the way in smartly detecting and preventing money laundering A structured approach will help organizations to swiftly explore possibilities, experiment with the technology and develop innovative blockchain-based solutions, in a cost effective way • Understand application of Blockchain tech. for AML • Secure exec sponsorship. 1 • Setup a working group • Validate hypothesis • Design PoC engagement 2 • Select and on- board PoC participants • Kick-off project 3 • Develop prototype application • Test use cases. 4 • Review PoC • Evaluate options • Move to mainstream deployment (in a phased approach) 5 Guiding principles:  Set up a lab-like environment. Start small. Begin with a few select processes that can be showcased to a wider audience to highlight benefits and prime adoption.  Secure alignment. Press for cross-industry participation - Central Bank, Regulator, Banks, Intermediaries like clearing houses, etc  Aconsortia-based approach can accelerate the integration with key existing systems as well as the rollout across participants A 5-Step Methodology to explore the potential of Blockchain technology for AML/TFML
  9. 9. NGT Ventures LLP 9 Learn how you can harness Blockchain technology to detect and prevent money laundering Drop us a line or reach us via any of the channels below: +91 9820386446 +65 96536243 @blockchainworx info@blockchainworx.com www.blockchainworx.com Reach Us

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