Tackling Money Laundering by Implementing Blockchain
- Blockchain
We all know that cryptocurrencies are intangible digital currencies generated, verified, and recorded by a decentralised system using cryptography. The very idea of no ownership, where it is not owned or governed by a central authority, makes cryptocurrencies more prone to criminal activities including money laundering. The transactions made using public key cannot be directly linked to any individual or organization so cryptocurrencies are the most sought-after payment method due to their anonymity.
Blockchain to the Rescue
The same characteristics of Blockchain are being used to countermeasure the problem of money laundering.
The fact that Blockchain uses a decentralized network where connected nodes are required to validate any changes, makes it secure, provided that no one has gained control over 51% or more of the nodes. Each node has a copy of the entire ledger, making use of this immutable ledger to compare any changes in the records and thus detecting any unsolicited entry.
Introducing the KYC model, having a recorded ledger with verified IDs associated with each transaction, will curb the problem of money laundering as such a ledger would provide solid evidence in a court of law about the person or the company's act to launder money.
One can follow the Japanese model of licensing wallets and accounts. One can easily trace back to the originator of such transactions if they were issued a license or something of that sort, thus curtailing the chances of laundering acts.
While the development of a full proof solution that helps anti-money laundering is still very far, Blockchain technology does have the potential to succeed. Several startups and other companies are focusing on solving such issues. Work of companies like Evernym, for example, is already helping out with the problem of ID verification which is going to play a part in the prevention of money laundering.
One thing is clear - Blockchain offers a chance to put an end to issues like this or at least reduce it significantly. Let’s hope that Blockchain succeeds where others have failed.
Enhance your understanding of blockchain technology by enrolling in blockchain courses available on FutureSkills Prime - India’s Technology Skilling Hub.
Written by Anurag Kumar, Project Manager, NIELIT PATNA