Scathing reports by regulators have accused traditional banks of inadvertently helping “drug kingpins and rogue nations” – enabling them to commit money laundering, make questionable transfers and evade economic sanctions and taxes.
It is a problem that dates back decades. Indeed, an article in The New York Times from 1989 estimated that $100 billion in revenues from cocaine sales in the US alone were ending up in the hands of a violent drug cartel in Colombia. The advent of electronic wire transfers was to blame, with one politician warning: “The bankers are unconsciously and haphazardly and lazily acting in complicity by failing to do enough.”
Come 2012, HSBC was in hot water and fined almost $2 billion because it had failed to prevent criminals from using its infrastructure. Its division in Mexico had inadequate money laundering controls, with a US senate committee report accusing it of being reluctant to close suspicious accounts. The report also concluded it had circumvented strict rules to do business with the likes of Iran, North Korea and Burma, which the US defines as “rogue states.” Two of HSBC’s divisions were found to be altering transaction details to remove references to one forbidden nation. On top of this, it was claimed HSBC had links to organizations that funded terrorism.
A blockchain financial technology startup has pointed to these examples – as well as several others – as proof that current regulatory regimes are not working as they should be, and compliance is patchy. The Ivy Network says the know-your-customer (KYC) and know-your -transaction (KYT) checks on its platform have the potential to be better than what banks currently use, speeding up transactions without increasing costs or reducing transparency.
Online and mobile banking,