Blockchain technology stretches across a wide selection of corporate industries. This ever-evolving digital ledger chronologically and publicly records transactions, and now has anti-corruption compliance professionals asking how blockchain fits into a broader corporate compliance strategy. Tom welcomes two thought leaders from Ernst & Young: Paul Brody – Principal & Global Innovation Leader, Blockchain Technology, and Alexander Perry – Executive Director of Forensic Technology & Discover Services. Tom, Paul, and Alexander discuss the power of blockchains and how they can be effectively implemented in a compliance practice.
- What is blockchain? Simply put: a transaction-processing system that allows account-based systems to move items of value (ex. Bitcoin) from point A to B or other accounts.
- Basically, any company that works together (B2B) can benefit from implementing the blockchain based on these three characteristics:
- Distributed Ledgers – shares information by making full copies of transaction histories available throughout the blockchain environment. This means you always have the best information reliable and readily available.
- Programmable Ledgers – shares business processes by integrating shared existing facts.
Consensus Algorithm – Allows you to move and track assets securely and reliably without appointing a central digital authority that controls the whole system.
- In Fraud Magazine’s July/August 2018 Issue, Vincent Walden said, “32 percent of legal, compliance and anti-fraud professionals plan to adopt blockchain and distributed ledger technologies in 2018.”
- As this technology is relatively young still, Paul estimates the number of early blockchain adopters is currently somewhere between 2-5%. But they’re starting to see industrial implementations now, where businesses use blockchain for more than prototyping, and to implement business processes as well as write compliance rules into smart contracts.
- Alex shares that one of blockchain’s greatest security feature is it’s unchangeable and immutable nature, meaning it cannot be corrupted without destroying the whole blockchain. Since fraudulent activity depends on manipulating transactions and ledgers after the fact, the immutable features of blockchain are invaluable for security and compliance.
While blockchain shows promising results and returns, no system is perfect. Although blockchains are mostly secure, it is still constantly being tested for weaknesses and improved upon. Public blockchain technology is evolving faster than private blockchain technology due to a higher volume of attacks on the system, which promotes a more rapid learning curve, calibration, and improvements. And there is still much to learn about this encryption technology, both about its structure as much about its wider implications and applications. As businesses and technology shift, so will the fraudsters, and no matter how useful and important blockchain technology becomes to this industry, the struggle between fraud and compliance will likely not have a perfect, one-size-fits-all technical solution.
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