Blockchain and Anti-money Laundering – What is the Future?

Actimize AML Product Team, Anti-Money Laundering

(Join NICE Actimize and R3 in a “Technology Trends and Blockchain” webinar on July 14, 2016. This session will provide an in-depth look at blockchain and how it is impacting the financial services organizations sector. To register, click here).

“May you live in interesting times” is not in fact, as many believe, an ancient Chinese curse. Instead it is likely an English phrase, coined in the late 19th century that was a poor translation of the original Chinese saying.

The premise of this expression is that it is better to live a peaceful (albeit boring) life, than to witness times of rapid change – which is usually associated with war and calamity.

But in the technology world, ironically, rapid change is the only constant that one should expect. We do live in an interesting time where new technologies consistently emerge and sometimes gloriously fail. It’s interesting because, when a new technology debuts, predictions about how it will actually be used and impact people’s lives are not always accurate.

Take smart phones, for example. I hate to admit it, because it reveals how old I am, but I remember the time when you actually had to schedule an appointment with someone at a specific time, and in a specific location for two people to actually be considered having met. Back then, I don’t think anybody envisioned that a smart phone would not just be used as a mobile phone, but also as a camera, recording device, or even a wallet. Had anyone entertained the thought that many people would actually prefer to communicate via text messages, or applications such as WhatsApp and Snapchat, rather than via an actual, standard, voice call?

The point I’m trying to make is that you never know how new technologies will end up being used. And yes, I’m talking about blockchain.

Blockchain is the new popular kid on the block, and it seems that the topic of blockchain (or sometimes generically called a “distributed ledger”) comes up in almost every discussion. While this may be over simplifying its very definition, in essence a distributed ledger is a new way of saving data in a distributed form (vs. a traditional ledger that is held in a single central location). Since each member of the ledger holds a copy of the entire ledger, there is greater emphasis on verifying new information that is being added. Once information is added to the distributed ledger, it can no longer be changed – which is why it is sometimes being refer to as a “blockchain” – with additional “blocks” of information being added one on top of another, so there is no dispute over who holds the “latest” record.

Like any new technology, the key lies with the way companies – both financial services organizations and technology vendors – will be leveraging this new capability.

From an anti-money laundering perspective, many questions will probably rise. For example – will shared ledgers allow greater transparency on the origin and usage of every transaction? Or greater anonymity? What are some of the new AML topologies that we could expect? And what does it mean for CDD/KYC programs? Answers to these questions will depend on the way the industry leverages the new technological capabilities.

Companies such as R3 are currently working with the financial industry in order to do just that – understand how this new technology can be used and what would it mean for the future of the financial industry.

We live in interesting times because distributed ledgers could cause a revolution in the anti-money laundering space, leading to greater amount of available information and great transparency but also to greater risks. According to R3, who notes that distributed ledger technology has the potential to change financial services as profoundly as the Internet changed media and entertainment, this is coming to us faster than you think. It can only benefit financial services organizations to stay on top of these changes, to ensure that they are preparing for the impact which they might face in the future.


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