Blockchain use case: know your customer(KYC) and Anti-money laundering (AML)

Blockchain KYC Verification: Blockchain can verify KYC databases and provide authentication instantly. There are services such as KnowMeNow, CIVIC, etc which provides blockchain based verification system. Blockchain can help keep a systematic track of transactions but cannot directly help in money laundering if it is Cash-to-Cash transaction. It should be on the chain or through a banking channel at some point.

It is easy to see how financial institutions can leverage blockchain for KYC. The blockchain is an immutable ledger, in this case the ledger would be run by nodes in a private setting (private customer data). Blockchain would absolutely streamline the storage and query process for institutions.

Financial institutions have a clear incentive here to migrate and leave old legacy systems behind!         –Jean Lukas Merville

How blockchain helps in ‘KYC’ ( Know your customer) and in anti money laundering.

Unlike most people think, a blockchain implementation can help with more than just financial transactions. It’s actually a shared ledger in which any kind of data can be represented, just like customer records. And in enterprise scenarios, it can even deal with privacy and other cryptographic properties required to handle really delicate data such as KYC.

One of the main pain-points in the financial industry is the running process to acquire and clean/curate input data to enforce anti-money laundering policies. In general, the process requires vast amounts of trustworthy data that most of the times are already stored in other companies data bases. By enabling secure means to share that data between limited amounts of identifiable parties the general costs for industries such as insurance or financial services can be dramatically reduced.

All of this should comply with regulatory compliance requirements within each industry, however, if implemented customers and companies could benefit alike.

Walter Montes

KYC and AML – organizational identity, or legal identity is important for banks and financial institutions to know who is the ultimate beneficial owner (UBO) definitively – this is currently not the case as in certain jurisdictions you can play a shell game of corporate identities owning other corporate identities, making it difficult to understand the true human UBO.

Earlier this year, I completed US government funded research in this area that resulted in the following report. Entities, Identities, Registries: Exploring the Market Gaps in Corporate and IoT Identity is:

This 32 page graphic heavy report, Entities, Identities, Registries, explains what Non-Person Entities are (NPEs), the relationships NPEs have with humans and each other, and identifies market gaps in today’s technology solutions. This report identifies 11 market gaps – problems the private sector is not successfully/comprehensively solving to date.

One of the market failures described in the report has to do with UBO. Corporate delegation (e.g. who has authority to take action on behalf of a corporation) is also important and could potentially be solved using some decentralized identity technology which also uses blockchain.

One solution (that can use blockchain or DLT technology) is a business web of trust, where you use Verified Credentials and Decentralized Identifiers to verify that a company is who they say they are from the multiple entities the company works with (banks, governments, other enterprises).



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