A fintech firm that’s challenging the $2-trillion industry of money laundering is using a cryptographically secure communication technology that allows banks to protect private data while helping other financial institutions track suspicious activity.
Taavi Tamkivi, co-founder of Salv, an anti-money laundering crime fighting tool, says mountains of information on a particular customer could be hidden or siloed off from other financial organizations or law enforcement, hindering officials from busting criminals and breaking up large-scale operations.
Tamkivi says the Danske banking scandal, the largest to hit Europe with over $200 billion in illicit transactions flowing through Estonian, Russia and Latvia from 2007 to 2015, was a symptom of poor detection tools that allowed shadow deals and money laundering to flourish.
In an interview with ZDNet, Tamkivi says,
“Danske and others who got into trouble relied on antiquated technology that financial criminals could easily circumvent. The compliance teams didn’t have the data at their fingertips, and couldn’t easily adapt their systems to keep up with the smart, rich, powerful criminals abusing their bank.”
The United Nations Office on Drugs and Crimes highlights the challenge of catching criminals in the traditional global financial system where records can be manipulated, data can be suppressed or doctored, and bad actors can collude.
“Fuelled by advances in technology and communications, the financial infrastructure has developed into a perpetually operating global system in which ‘megabyte money’ (i.e. money in the form of symbols on computer screens) can move anywhere in the world with speed and ease.”
But sharing data and coordinating anti-money-laundering efforts comes with its own set of risks that could result in a data breach. Tamkivi, a former manager at Skype and Transferwise, says Salv’s API-based messenger capability allows financial institutions to cooperate and communicate about suspicious activity.
“This means the banks aren’t siloed and can gain the upper hand against organized criminals systematically targeting them.”
“Our customers can take everything they learn today from new criminal patterns, encode it in automated rules tomorrow, and repeat that cycle every day to protect their bank…
At the end of the day, compliance and crime fighting comes down to processes and incentives. To combat financial crime, banks need not just passively tick compliance boxes but actively investigate suspicious behavior. Incentives – across the whole banking industry – need to prioritize taking smart risks, with sufficient controls in place.”
While Tamkivi’s firm aims to reduce money laundering through a layered solution that can be applied to fiat currencies, such as the US dollar, cryptographically secured tokens and cryptocurrencies, including Bitcoin, Ethereum and Litecoin, utilize blockchain technology to create value that is automatically timestamped and recorded.
These transactions are inherently secure and immutable, preventing people from conducting the types of wide-scale financial schemes and money-laundering operations that have recently embroiled some of the biggest banks in the world, from Deutsche Bank to Wells Fargo to Westpac.
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