Tech experts endorse blockchain technology to curb money laundering in Nigeria
By Cynthia Ezekwe
Blockchain technology, an advanced database mechanism that allows transparent information sharing within a business network, has a strong potential to curb money laundering in Nigeria, according to technology experts.
Edward Onyenweaku, lead risk and compliance, eTranzact International Plc, a technology offering services for electronic transaction switching and payment processing, recommended the use of blockchain technology in Nigeria’s financial system to improve transparency and eliminate money laundering.
Onyenweaku, made the advocacy during a panel session tagged, ‘‘The Growing Threat of Money Laundering in the Financial Sector – Know Your Customer (KYC) and Anti-Money Laundering (AML) as a Disabler,’’ at the 2023 edition of AfricaNXT conference in Lagos.
According to Onyenweaku, blockchain technology increases the level of trust, security,transparency, traceability and security of shared data ,as it keeps record of currency transactions in a detailed manner.
He added that blockchain automates the process of fraud detection with the help of built-in algorithms, regardless of the fact that money launderers will do everything possible to conceal the source of their illicit funds in order to avoid prosecution and other sanctions imposed by the law.
“Blockchain maintains a complete history of past transactions within the network, which means that the user can track the data with full transparency; it also supports compliance automation by providing clean, accessible, real-time data, instead of asking people and third parties information on reviewers and auditors can verify transactions on blockchain records instantly, without contacting intermediaries,” he said.
Onyenweaku further pointed out the impact of money laundering in the financial sector, saying it erodes profits due to sanctions by the regulators as well as low confidence in the market.
He further outlined the consequences on the Nigerian economy, which includes loss of financial institutional reputation, credibility, revenue and investors’ confidence.
Business A.M gathered that the effect of money laundering on economic development in Nigeria has constituted damages to the financial sector, reduced government revenue, and encouraged crime and corruption, which slows economic growth and distorts the external economic sector.
In its latest global ranking on money laundering and terror financing risks, the Basel Institute on Governance,an independent non-profit organisation dedicated to countering corruption and other financial crimes, classified Nigeria as a high-risk country for money laundering and terrorist financing. The institute, in a report titled “Basel AML Index 2022: 11th Public Edition – Ranking money laundering and terrorism funding concerns around the world”, ranked Nigeria 17th out of 128 countries with a score of 6.77 out of 10. The report specified that many countries including Nigeria were not doing enough to tackle the issue of money laundering and terrorist financing.
To this end, Akash Takyar, the chief executive officer of LeewayHertz, a leading web3-focused software development company delivering tailor-made digital solutions to businesses worldwide, stated that transactions done over blockchain leaves behind a permanent trail of records which is impossible to be altered, which makes easier for authorities to track the original source of the money.
Takyar also stated that a public blockchain ledger can supervise, validate, and record each transaction’s complete history,while noting that blockchain also enables money laundering risk analysis and reporting mechanisms. It allows overall system analysis rather than monitoring just entry and exit points.
Speaking on the role of blockchain in curbing money laundering, the CEO said: “The Blockchain is a decentralised network where each user or node has to validate changes. This feature makes the network incredibly secure. Every node has a record of the entire ledger and can compare any modifications and detect any unauthorised changes. Since Blockchain removes unauthorised changes, it brings integrity and immutability to the data.”
Takyar also stated that blockchain automatically incorporates the trust of the users, and securely establishes trust for any transaction helping in the movement of money or any other sensitive data worldwide.
He also pointed out that integration of smart contracts in a blockchain-based Anti-Money Laundering (AML) platform automates the process of fraud detection in the system.
“In-built algorithms keep a continuous check on every transaction, automatically generate an alert for a suspicious transaction and immediately block the transaction. Thus, implementing blockchain in AML enables one to gain oversight over all the transactions,” Takyar concluded.