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Deltec Bank, Blockchain Applications for KYC and AML
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Deltec Bank, Blockchain Applications for KYC and AML

An individual can quickly establish their identity by providing government-issued documents. A passport, driver’s license, or Social Security card can meet the Know Your Customer (KYC) regulations, but it requires an in-person visit to authenticate the information. The decentralized architecture of the blockchain allows for data accumulations from multiple authoritative service providers. This information then goes into an immutable, secure, and validated database that meets today’s KYC and AML expectations.

Institutions would send requests to a blockchain platform to access identity information. Only users could grant their consent to see this data. It would involve one-time passwords and private keys so that identity validation could occur in real-time.

It’s an approach that can help in a variety of different ways.

1. It creates a centralization of risks

Corporations can reduce risks because blockchain naturally limits the levels of human input that are needed to make the system work. Standardization throughout the industry would allow the data to provide direct oversight over compliance issues, minimizing mistakes and opportunities for fraud in the critical KYC and AML areas. 

2. It offers automation with policy standardization.

According to Deltec Bank, “Blockchain solutions can use smart contracts to execute operational and control processes to maintain compliance. This structure allows for policy standardization to take place across an entire industry, enabling an automated approach to compliance.” Even multilingual solutions would fall into this category, giving multinational firms a unique cost-savings benefit to consider with this technology.

3. It distributes data collection for users.

The current method of data storage involves the use of a centralized system. Accessing this information requires providers to share their client data with third-party agencies. It helps with KYC and AML compliance, but this process also creates more security issues to manage. Implementing blockchain applications to handle this information means that it is up to each user, not their financial institution, to supply this data.

4. It improves the accuracy of suspicious activity reporting.

It can take several weeks for the KYC process to complete in some places around the world. The cost of maintaining regulatory compliance moves upward for every hour a financial institution must remain in charge of this data. The use of a shared ledger that multiple institutions would use would spread out the cost and risk of maintaining regulatory compliance. This structure would also provide more accurate alerts for suspicious activities.

The blockchain applications for KYC and AML will work to create a comprehensive authentication process. It’s an approach that can help institutions verify a person’s identity quickly, improve data protection practices, and work to reduce fraud. When we operate in a world with greater transparency, it will become easier to keep people safe while maintaining regulatory compliance.

Disclaimer:  The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.

About Deltec Bank

Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.

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