The Singapore BIS Innovation Hub has completed the Project Mandala proof of concept (PoC), which aims to bring efficiencies to anti money laundering (AML), sanctions and capital flow management (CFM) compliance. It provides a technical solution, allowing banks to rely on checks performed by other banks in a privacy preserving manner using cryptography. Mandala can help with payments via the current correspondent banking network, where large value payments are regularly delayed because of compliance queries. It also supports upfront compliance checks, which are important for tokenized money and digital asset transactions.
The central banks of Singapore, Malaysia, Australia and Korea took part in Project Mandala.
The Project Mandala report outlines some of the key drivers behind the need to make compliance checks more efficient. During the past ten years compliance regulations have grown at a rate of 15% per annum. That sounds like a large figure, but compounding that is even more shocking: it translates to four times the number of regulations compared to ten years ago. These increasing compliance costs have made banks more picky about the jurisdictions they deal with, resulting in some payment corridors having few or no correspondent banks, and making cross border payments expensive. Hence, the G20 cross border payment goals include improving compliance.
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