Compliance solution providers Dow Jones Risk & Compliance and EastNets have completed a blockchain Proof of Concept (PoC) for Anti Money Laundering (AML). The AML process involves filtering identities through watch lists. As blockchains are essentially lists, the test provided near real-time updates of watch lists using blockchain.
According to EastNets the PoC achieved higher levels of accuracy and security in the watch list update activity, and hence in the screening process. The PoC involved a leading UK-based financial institution.
EastNets has an en.SafeWatch Filtering product that allows institutions to check all transactions, messages, and customers against various watch lists. In turn, Dow Jones provides watch lists and for this project provided a higher frequency feed. The feed was published on the EastNet’s blockchain network so the lists used by financial institutions could be updated in near real-time.
Hyperledger Fabric was used to provide enterprise-level permissioned access.
Given the use of feeds, it’s unclear how blockchain is an advantage over other technologies. EastNets weren’t available for a response, so some scenarios are considered below.
If staff at a bank manually add names from a feed to a bigger list, there would be a security issue. That’s because they could omit a name either in error or deliberately. Additionally, if a bank automatically imports a list into their own systems, it could potentially be manipulated within the bank. If that’s not a concern, it’s hard to see the blockchain benefit.
However, if a bank’s system directly uses an external list, arguably the bank’s staff can’t tamper with it. But it moves the data vulnerability point from inside the bank to the process between the blockchain and the feed source. So, in this case, Dow Jones would need to monitor that the blockchain matches its feed.
“The new blockchain network automates list updates and eliminates manual processes, thus providing higher security by making the updates tamper-proof. Making Dow Jones’ watchlist updates available to organizations using en.SafeWatch Filtering also eliminates lengthy update processes, while giving customers using the network the assurance of world-class data and low false positive rates,” said Hazem Mulhim, CEO EastNets.
Guy Harrison, Managing Director, Dow Jones Risk & Compliance, said: “The combination of blockchain technology and high quality, structured data has the potential to significantly enhance the speed, accuracy and security of financial institutions’ watchlist screening. The success of this POC is clear evidence of that, and we look forward to further deepening our partnership with EastNets in this field.”
EastNets is planning to go live with the solution in the first quarter of 2019.