How Blockchain Technology Helps to Prevent Financial Frauds
Money laundering and financial frauds have become the latest topic of discussion as this has affected the financial sectors a lot. Someone could use your personal information and gain access to your accounts and carry out transactions. Cyber-attacks have become the greatest threat today and it is time to store the files in a secured manner so that illegal transactions can be brought under control. In today’s market blockchain is a highly recommended process that helps to check these flaws in the system and protect the electronic payments in financial organizations.
The blockchain technology is a promising, tamper-proof digital record keeping platform, which helps to maintain the asset transfer records safely and in a stable manner. Whenever there is a financial transaction done using a blockchain technology, the payee has the right to trace the complete wire transfers. This promising quality is one of the main reasons that financial organizations are actually exploring the blockchain technology and integrating it in their financial network. Most people relate blockchain with Bitcoin digital currency. Though the underlying technique behind this successful viral currency is this, but it has much more potential to support a wide range of industries and verticals. It eliminates the need of a middleman and brings back the power to individual trading partners and helps to make processes more transparent than ever.
How the Blockchain Technique Helps to Fight Fraud?
Blockchain offers a very complex functionality where the digital records combine into blocks and all the blocks make a chain chronologically and cryptographically connecting the network that uses sophisticated mathematical algorithms. Each block maintains a unique set of records that is connected to the previous one and the encryption technique is used for safety. The information that is saved on the block cannot be altered or modified without permission.
Important Features that Help to Prevent Financial Fraud
1- Distributed network:
Blockchain is a distributed digital ledger that helps to store data that is shared with many computers on the network. Since there is no prime authority, there is no one point of failure. The control and authorization of the data spread across the network so that there is no single place to commit fraud. Criminals use various methods to instigate frauds and some practices include altering or deleting the data in the records, altering or creating digital or electronic papers or even creating corrupt files. It is because of this high visibility and complete transparency, that blockchain prevents any kind of fraudulent activity.
Business data contains a lot of confidential data involved and offering an easy access to anyone is not a good choice. In order to ensure that no outsiders can access the company information or any insider can corrupt the data contained in the system, blockchain offers permissions to make things secured. Such permissions are really great for preventing any fraud activities as they restrict the access to the system and assign permissions on who can and who can’t access the important data.
Once the data or transaction is saved or registered on a block, it cannot be altered or deleted. And before any new block is attached to the chain, all the participants have to validate the data on the block. This is known as Consensus. It is only after consensus that the block is approved and after which it is connected to the previous block on the chain. A new transaction can be created, but that will not affect the existing available data in the blocks. So, with blockchain, users can easily get the data about the origin of the asset, its owner and also the journey so far.
“In a nutshell, blockchain is a great technology that helps to detect fraud in financial transactions and can be enhanced by using machine learning algorithms that restrict frauds. It is transparent and users are wholly accountable and responsible for their actions. The technology is still in the growing phase and has great potential for a secured and technocratic future.”