Director of Edgar, Dunn & Company, the management consultants, asks the question, can blockchain or distributed ledger technologies combat cybercrime in financial systems?
As director of EDC’s London office, Samee Zafar has advised some of the biggest financial services organizations in Europe and North America focusing on competitive strategy, operations, and technology.
With his expertise covering retail banking, card issuing and acquiring, and electronic payments such as Internet and mobile payments his recently published blog on Finextra is a timely piece on the issue of cyber criminals.
He focuses on how even though banks follow set procedures to validate individuals and detect irregularities with hundreds of billions of dollars at stake, flaws can still be found.
Even with all these financial fortifications in place and armies of back-office staffers monitoring money movements, now and again hackers manage to get away with very large sums of money.
He cites the $81 million theft from the Bangladesh Bank account with the New York Federal Reserve that took place earlier this year as an example of how cyber criminals have reached new levels of sophistication.
The Bangladesh heist was the work of confident criminals who knew their way about the system, avoiding the strongest defences and targeting the weakest links in the international payments network.
Are Blockchain and DLT the Solution?
Blockchain was initially developed to support the popular decentralized digital currency, bitcoin as it provides a record that can’t be argued helping to establish ownership over bitcoins. As such it doesn’t require a centralized government to approve or make decisions for it.
Of course, while blockchain is autonomous, according to Zafar, ‘distributed ledger architecture can support all types of systems.’ While he mentions that a distributed ledger system is likely to be less autonomous in financial services it can still be effective.
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Is Blockchain the Answer to Preventing Cybercrime?
01/09/2016Rebecca Campbell
Blockchain NewsNewsWorld Security
Director of Edgar, Dunn & Company, the management consultants, asks the question, can blockchain or distributed ledger technologies combat cybercrime in financial systems?
CyberCrime
As director of EDC’s London office, Samee Zafar has advised some of the biggest financial services organizations in Europe and North America focusing on competitive strategy, operations, and technology.
With his expertise covering retail banking, card issuing and acquiring, and electronic payments such as Internet and mobile payments his recently published blog on Finextra is a timely piece on the issue of cyber criminals.
He focuses on how even though banks follow set procedures to validate individuals and detect irregularities with hundreds of billions of dollars at stake, flaws can still be found.
He said:
Even with all these financial fortifications in place and armies of back-office staffers monitoring money movements, now and again hackers manage to get away with very large sums of money.
He cites the $81 million theft from the Bangladesh Bank account with the New York Federal Reserve that took place earlier this year as an example of how cyber criminals have reached new levels of sophistication.
He adds:
The Bangladesh heist was the work of confident criminals who knew their way about the system, avoiding the strongest defences and targeting the weakest links in the international payments network.
Are Blockchain and DLT the Solution?
Blockchain was initially developed to support the popular decentralized digital currency, bitcoin as it provides a record that can’t be argued helping to establish ownership over bitcoins. As such it doesn’t require a centralized government to approve or make decisions for it.
blockchain
Of course, while blockchain is autonomous, according to Zafar, ‘distributed ledger architecture can support all types of systems.’ While he mentions that a distributed ledger system is likely to be less autonomous in financial services it can still be effective.
He said:
A fraud prevention system based on a distributed ledger approach with multiple databases working in sync can be deployed to combat fraudulent incidents of this type very effectively.
Currently, the responsibility of creating strong risk management controls is down to the individual bank. This means that there are inconsistencies with a variety of risk controls and procedures in place.
In order to combat these inconsistencies, a distributed ledger system would benefit large and small banks, cutting out the central network middleman known as SWIFT, according to Zafar.
Banks Are Exploring Hybrid Systems
Banks, Zafar says, are turning their attention to hybrid systems where a single authority looks after the records centrally, but at the same time encourages and maintains a distributed ledger system where security and integrity are maintained.