Today it was reported that more than 80 Japanese banks have signed up to use JP Morgan’s blockchain network for addressing anti-money laundering (AML) issues, said Bloomberg.
JP Morgan’s Interbank Information Network (IIN) is a communication network. Instead of actually making the payments, it enables participants to improve compliance for payments. The goal is to address problem payments which require a lot of back and forth between financial institutions. The platform uses Quorum, the enterprise version of Ethereum developed by JP Morgan. A senior JP Morgan executive previously highlighted the benefits of IIN.
In the past, Japan has been criticized by The Financial Action Task Force (FATF) for having a weak AML system. Last year, the country’s financial regulator urged lenders to step-up their efforts for AML compliance, a Reuters report said. Japan’s Financial Services Agency wants banks to do a better job with customer due diligence and know your customer (KYC) activities.
IIN was launched as a pilot in 2017, and the first application was centred around AML inquiries between banks, which often delays cross-border transactions. Daizaburo Sanai, an executive director at JP Morgan, told Bloomberg that the Japanese interest stems from IIN’s capability to screen payment recipients faster and more efficiently. In January the solution which is already active in other jurisdictions, will launch in Japan. The network now boasts over 365 participants, with about 60 banks already live.
The incumbent payments leader SWIFT launched the Global Payments Initiative (GPI), enabling banks to achieve transparency and traceability for cross-border payments. However, it doesn’t provide the same level of communications to resolve compliance queries.
JP Morgan’s IIN boasts some high-profile members including Deutsche Bank, Société Générale, China CITIC and Mizuho. But the network still lacks some of the big global banks such as ING and BNP Paribas who are quite active in the blockchain space. Unlike other blockchain cross-border payment networks, IIN uses the existing infrastructure of participating banks.
Three months ago, Mastercard and blockchain firm R3 announced they were developing a cross-border payments solution. The solution will leverage the former’s existing payments network.