Blockchain: Building Trust in a Trustless System?
TECHNOLOGY, INNOVATION, LAW AND TAX
By Audrey Lynch and Adam McCarthy
A degree of trust between parties is required in legal transactions. However, if an immutable record of data existed, we could eliminate this dependency on others. Blockchain technology aims to do just that by using a decentralised network. With no central authority, it is incredibly difficult to alter the data inside a ledger. A user would have to control over half of the platform to create a consensus. This fundamental principle leads to a secure system. As a result, certain industries are moving their processes over to this new technology, particularly those that require a greater degree of trust.
Combating Money Laundering
The global money laundering industry is thriving and is estimated to amount to up to $2 trillion per year. In 2012, HSBC Bank was fined $1.9 billion for violations of anti-money laundering regulations in Mexico. Two years later, the French bank BNP was charged $8.9 billion dollars for concealing over $190 billion in transactions for clients who were subject to US sanctions. Failing to adequately maintain anti-money laundering (“AML”) procedures can be an incredibly costly mistake. However, maintaining these procedures is expensive and time consuming. Know-Your-Customer (“KYC”) requests can often take up to fifty days to complete. Blockchain has the potential to reduce costs and delays in this field.
Read RDJ's full summary of this banking and finance update here.
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