Hong Kong Securities and Futures Commission head: Blockchain can prevent money laundering and reduce fraud risks

The recent popularity of blockchain has also attracted the interest of regulators. According to Benedicte Nolens, head of the Hong Kong Securities and Futures Commission (SFC), blockchain can help financial institutions solve the problem of money laundering.

The inherent characteristics of blockchain technology make it a powerful solution to combat money laundering. Not only is blockchain transparent, it can also prevent duplication of transaction data and reduce the risk of fraud.

Nolens said that blockchain technology is used in anti-money laundering and KYC supervision. She explained:

“I think it’s clear that there are inefficiencies in KYC and AML. If you start to settle fines, which banks have been fined on globally, you’re going to settle $10 billion, maybe more.”

The big question then becomes how blockchain can be used to prevent money laundering. Using the technology to comply with KYC and AML could potentially reduce the number of errors through automation. In addition, records of all checks performed on each individual customer could be stored on a distributed ledger.

(Photo: Benedicte Nolens)

Using distributed ledgers to end money laundering

Whether financial institutions will suddenly embrace blockchain technology remains to be seen.

Currently in Hong Kong, there are no specific regulatory guidelines on this technology, which makes financial market participants cautious about this technology.

Nolens said banks should ensure that any application of the technology complies with legal regulations. In addition, it takes time to apply blockchain technology to the banking system. Therefore, it is likely to take several years for blockchain to be widely adopted.

Open blockchain is necessary

Furthermore, private blockchain solutions are not feasible, nor are similar permissioned solutions.不可更变性is an important component in preventing money laundering, and only public blockchains can provide this feature.

This leaves institutions with two current blockchain solutions to choose from: Bitcoin or Ethereum.

However, bankers do not welcome both cryptocurrencies because they cannot exert control over them. They cannot control an open blockchain, but they can build new applications and services on one of them. Using distributed ledgers to address money laundering will require an open solution with additional privacy-centric features.

What do you think about using blockchain as a tool to combat money laundering?