Compliance investigations are not on many lists of fun things to do, especially when they turn into litigation. But they play an important role in maintaining integrity and order in industries we rely on, especially when markets are volatile. These investigations help organisations adhere to laws, regulations, and internal policies. They help regulators, consumers and policymakers identify, understand and remedy issues. They provide the basis for improving trust by adapting regulations and reporting methods so they keep pace with new technology, like AI.
Investigation and litigation are costly, time-consuming affairs that only offer a glimmer of hope if they can be resolved quickly and in ways that restore confidence in the business in question. Concluding these investigations is a daunting task, as, for many organisations, that involves sifting through vast amounts of data across various applications and storage platforms, verifying the authenticity of documents, and ensuring the accuracy of records. This is where blockchain technology, an emerging innovation in the RegTech sector, has the potential to revolutionise compliance investigations.
Here are some intriguing ways blockchain tools, like ByzGen’s LogLocker solution, can assist in investigation and litigations by ensuring efficiency, security, and reliability.
One of the main challenges in compliance investigations is ensuring data integrity. Blockchain, being based on a decentralised and immutable ledger, provides a clear solution to this problem. By storing data in a distributed network of computers, blockchain eliminates the risk of unauthorised tampering or alteration. Each transaction is recorded as a block linked to the previous one, forming an unchangeable chain. This transparency and immutability make blockchain an ideal tool for maintaining the integrity of evidence and ensuring its admissibility in legal proceedings.
Compliance investigations often require verifying the authenticity of documents, data, certifications and communication - they need more insights, not less. Given the potential volumes of data involved, traditionally, this process is time-consuming and prone to human error. Blockchain offers a more reliable and rapid solution by providing a decentralised and transparent platform for document verification - one where permissioned third parties can be provided with direct access to relevant records.
The search tools offered by advanced platforms like LogLocker allow investigators to quickly find information they need and can trust. Through cryptographic techniques, documents, data, and communications can all be uniquely hashed and registered on the blockchain, creating an unalterable, searchable record of their existence and validity. This eliminates the need for manual verification, saving time and reducing the risk of fraudulent or adulterated information slipping through the cracks.
Financial transactions often form the backbone of compliance investigations, particularly in money laundering or fraud cases. Blockchain's ability to provide a transparent and auditable record of transactions can significantly aid investigators in unravelling complex financial webs. By using smart contracts, which automatically execute when predefined conditions are met, blockchain can enable real-time monitoring of financial transactions, reducing the risk of fraudulent activities going unnoticed. This level of transparency can help investigators trace the flow of data and funds, identify suspicious transactions, and ultimately bring wrongdoers to justice.
Data volumes are growing exponentially in regulated sectors, driven by the influx of AI technologies and the proliferation of enterprise applications. In this context, ensuring that sensitive data is secure and managed compliantly becomes even more challenging but ever more important. As does ensuring that it can be searched and investigated, should the need arise.
In compliance investigations, demonstrating that sensitive information has been safeguarded is paramount, as is showing that data has been stored and managed securely and in ways that respect regional regulatory requirements.
Blockchain's cryptographic algorithms and decentralised nature offer a robust framework for data security. Traditional centralised databases, whether cloud or on-premises, are vulnerable to hacking and data breaches, which can compromise investigations and put individuals at risk. In contrast, blockchain's distributed network makes it extremely difficult for malicious actors to manipulate or steal data. Additionally, blockchain's consensus mechanism ensures that any changes to data are agreed upon by most participants, further enhancing security and reducing the risk of unauthorised access.
New blockchain-based compliance platforms, like LogLocker, allow data and information to be stored in a distributed manner that respects location-based requirements - for example, not transferring data from EU-based data storage to storage in the US. This also allows for the application of geography-based policy and regulations, ensuring data can be shown to be managed, used and shared in ways that are compliant.
Collaboration with third parties, such as regulatory bodies, law enforcement agencies, and financial institutions, is essential in compliance investigation. Blockchain's shared and transparent ledger can facilitate seamless collaboration, enabling different stakeholders to search for, access and review real-time information based on relevant permissions. This eliminates the need for time-consuming manual processes, such as sharing documents via email or third-party data exchange tools.
By streamlining communication and ensuring data consistency across multiple entities, blockchain can significantly enhance the efficiency and effectiveness of compliance investigations, building trust even when litigation looms.
Blockchain can revolutionise compliance investigations by providing enhanced data integrity, streamlined document verification, transparent financial records, secure data storage, and improved collaboration. This means that regulators and businesses will need to actively explore its possibilities - because, at a time of great volatility and uncertainty, harnessing the benefits of blockchain might be the step we need to ensure the highest standards of integrity and transparency in the world of compliance now and in the future.
Whether you're a compliance officer, investigator, or simply intrigued by the intersection of technology and regulation, keep an eye on ByzGen’s progress in this field. Sign-up to the Frontier our quarterly newsletter.