Anti-money laundering has been a rapidly expanding area of the
financial industry for the better part of the last two decades. The World
Bank estimates that the volume of money laundering is as much as $3.5
trillion worldwide annually (nearly 5% of global GDP). Given that less than
1% of money laundering activity is actually detected by the banks and
financial authorities, the realm of regulatory compliance has grown
exponentially in recent years to try to incur better outcomes in this regard.
As such, the increasing demands, expectations, and pieces of distinct and
often-complex legislation that accompanies regulatory compliance have
created a need for large, dedicated departments catered specifically to
handling these tasks. However, advancements made in various forms of
financial technology – specifically blockchain – may offer an alternative and
arguably a more effective solution than that of even artificial intelligence and
machine-learning options that have begun to emerge in recent years. These
developments have led many of the world’s most renowned and powerful
financial institutions – as well as those hampered by bloated and
overburdened regulatory compliance departments – to explore the growing
capabilities with respect to keeping their respective enterprises secure and
up to par with all of the latest regulatory requirements.
Simply put, blockchain is a technology that acts as a digital ledger of
transactions that is duplicated and distributed across a chain of computer
networks. It is a method of recording information that is particularly
difficult to hack or alter in a fraudulent way. Popular cryptocurrency options
such as Bitcoin and Ethereum use blockchain technology as the basis for
their markets.4 Where does this factor into the realm of regulatory
compliance one might ask? Well, the integration of blockchain technology
into AML efforts could mean trimming the fat off of a significant amount of
work for compliance departments. Since the plight against money
laundering and other serious financial crimes gained significant traction
with the passing of Title III of the USA PATRIOT Act following the 9/11
terrorist attacks, financial institutions have desperately sought ways to
lower rising costs associated with hiring large compliance teams, bringing
on consultants, and paying for long hours of laborious work in order to keep
up with ever-changing financial regulations. This is for good reason,
considering that it is estimated that AML compliance spending totals
upwards of $30 billion collectively for American financial firms on an annual
basis. Compliance personnel operating under financial institutions whose
internal operations are not up to par with growing technological standards
can spend significant portions of their workdays manually verifying basic
International Cooperation Leads to Shutdown of Major Russian Money Laundering Network
Last week, the National Crime Agency (NCA) – the United Kingdom’s national law