Blockchain for FinTech and Regulatory Compliance

The Block Gemini team attended RegTech MENA 2018, to share their innovations in the space.

The honour to operate and grow in the blockchain capital of the world requires constant self-development from enterprises based in Dubai. That is why every conference season here is as hot as summers in July. Blockchain summits and forums held at luxurious venues bring together progressive industry leaders to share their experiences with local supporters of the 2020 blockchain strategy, and numerous visitors from all over the world, ready to empower their businesses using DLT (Distributed Ledger Technology).

RegTech MENA 2018, held in late April, was another event of this kind, focused on how new digital technologies can improve the process of regulatory compliance. The agenda included two days of highly informative presentations and panel discussions that turned the spotlight on regulatory issues faced by the financial industry, and the advantages and shortcomings of AI, robotics, blockchain, and other tech novelties being introduced to this domain. The audience was mainly represented by major financial institutions from the UAE and the UK. The Block Gemini team, headed by the company’s founder & CEO Christopher Fernandez, joined RegTech MENA to demonstrate the use cases of blockchain technology as fundamental for further innovations in regulatory compliance.

“We are here to show how integrating RegTech with blockchain will modernize the existing regulatory framework, including the KYC and AML related processes,”
- Anthony Lauriola, COO of Block Gemini

On the morning of April 24th, the networking breakfast was noticeably busier than they usually are on the second day of any conference — the delegates were exchanging opinions in anticipation of the only session on the agenda, focused solely on blockchain technology in terms of its relevance to the inevitable replacement of legacy transactional systems. The panel discussion “Blockchains: An Instrument of RegTech or Regulatory Destruction?” featured Christopher Fernandez, experienced IT professional and blockchain investor, placed to be the only advocate of DLT during that session, and his fellow panelists from influential financial institutions, who expressed their doubts and concerns, typical to the mainstream perception of emerging technologies.

The linchpin of the discussion was an obvious paradox that lies between the need to regulate the use of blockchains and their ability to resolve regulatory compliance issues. Standing his ground in front of a vast audience, Chris explained that blockchain-for-RegTech use cases include the optimization of KYC (Know Your Customer; the process of identifying and verifying the identity of a client), AML (Anti-Money Laundering) and regulatory reporting. No data inconsistencies, duplications or extensive documentation requests — the shared ledger, core to blockchain technology, enables monitoring and adjustment of all the processes in a more efficient way. Also, Christopher Fernandez admitted that we should have no fear of cryptocurrencies and tokenization,

“My two favorite words are “Tokenize Everything”, so it’s only a matter of time until we no longer need to spend ten to fifteen days to sell a piece of property. The average consumer with only a $100 to invest has zero options. But with blockchain, this average investor is able to tap into the real estate market where he can invest 100 dollars into a token and get a 10% yield every year. The first government to tokenize real estate assets, and I am pretty sure this is what Dubai Land Department is doing, the first government to do that and offer these kinds of opportunities to the consumer is going to have the most valuable property market in the world.”

Let’s take a closer look at the concept of RegTech and how it can benefit from the implementation of blockchains. Regulatory compliance technology started gaining momentum with the rise of fintech. It derives the public interest from the necessity to coordinate the irrepressible flow of technological changes in the financial sector with the existing legislation. Also, there was a great need for facilitation of particular processes, such as KYC and AML. As it was mentioned before, KYC and AML presuppose identification of personal/business sources of wealth and understanding of business interests/contexts of transactions. Currently, pitfalls in the execution algorithm of these processes create an environment prone to various risks. Thus, KYC tasks are repetitive that leads to data inconsistencies and duplication of operations. At the same time, the distinctive features of AML are extensive documentation requests, verification, and proof of identity.

Blockchain tech, as a shared distributed ledger that facilitates the process of recording transactions and tracking assets in a business network, can address all of these issues. First of all, chained transactions, recorded in a single database, make monitoring, auditing, and fraudulent/AML-type analysis significantly easier and more efficient, with no need for both regulators and insurers to duplicate their own records. Secondly, reduction of the stack of processes will also reduce the cost of compliance procedures — not to mention increased speed and automation. And finally, blockchain technology will enable creating not only the shared database, but also the platform to link transactions, marked by traceability and immutability core to all the blockchain-based transaction systems.

“The implementation of blockchain technology into regulatory processes will significantly improve their quality and accuracy, strengthening the regulator’s ability to resolve compliance issues and address existing audit requirements/new regulatory obligations in a more efficient way,”
- Sakaar Bhatia, Chief Blockchain Officer of Block Gemini

Block Gemini would like to thank the World Arena Group for their valuable help during all the stage of our preparation for RegTech MENA 2018. Our team greatly appreciates all the work you have done to make this event interesting and highly informative. If you, readers of Block Gemini Blog, missed RegTech MENA, visit our website to learn more about blockchain technology and benefits it brings to every industry.