The current turbulent economic environment has seen South Africa rise to the top of the Global Economic Crime and Fraud Survey, with a staggering 77% of South African entities having previously been a victim of fraud.

A large contributing factor to this title are fake presidency scams, which arise through a message being intercepted and altered or spoofed, causing the recipient to make a payment to a fraudulent bank account. In response hereto, insurers are requiring that two-step verification procedures be implemented and followed, when considering commercial crime and fidelity guarantee risks. This is in an effort to ensure that insureds are aware of this trend, and that they are implementing appropriate risk management processes, in order to prevent losses caused by this form of opportunistic crime. Insurers require that the insured follows a two-step verification process when payments, withdrawals and any other transfer instructions, including instructions to change third party bank account details, are received. This ultimately encourages better risk management, protecting both the insured and the insurer.

The disturbing increase in cyber-crime has resulted in research around the possible applications of blockchain. The adoption of block- chain in financial institutions and two-step verification policies are key to the reduction in financial fraud. IBM state that if blockchain is used, US$14 Billion of financial fraud could be avoided. The hype surrounding alternative investments in cryptocurrencies has made way for the underlying technology [supporting cryptocurrency] to challenge the systems and protocols implemented in corporations globally. Blockchain has the ability to hold and store information, whilst removing the potential exposure resulting from contract and trust.

‍The technology establishes an environment made up of efficiency, security, transparency and trust among those who participate. This is made possible through the application of cryptography which implements a verification process to ensure that transactions are not breached. Companies have subsequently further developed blockchain, extending the capabilities beyond financial transfers, to secure data transfer and multifactor verification. Due to the complexity of business, a deepened application is needed to allow for a predetermination of participants. Platforms such as GITHUB and IPFS allow for either; restricted rights, public access and verification or peer-to-peer restricted access with encryption for each transaction. This allows for an increased security without increasing the number of participants in the decentralised system. Finally, due to the cryptography, each transaction request is verified, registry journal is maintained and the concern surrounding requests being altered is removed.

In October 2017, Sony filed a patent for a multifactor authentication software. The multifactor authentication utilizes mathematical properties imbedded in blockchain to validate transactions made by a consumer. Multifactor verification offers a secondary security protocol, reducing risk of incorrect transfers or account breach.

The question which should be asked is not if blockchain will be implemented in every facet of our lives but rather when. A staggering 91% of financial institutions are investing in blockchain technology and 14% had already implemented some form of this by mid-2017 (IBM, 2018). As with most ground-break- ing technologies with multiple applications, this is expected to grow exponentially in 2018. The predetermination of participants, along with multifactor verification imbedded in blockchain, would therefore prohibit unknown breaches and alterations to key information. This would not only reduce the economic effect of fake presidency scams, but also other forms of financial commercial crime and how financial institutions will function in the near future.

As much as blockchain is changing the way society will conduct business, the development of this technology is being watched carefully by the specialist insurance market, who eagerly await the possible improvements which would be introduced through the implementation thereof. Through the adoption of blockchain and implementation of risk management procedures, this aspect of fraud may be eradicated. The near limitless application of blockchain, however, means that this could be poised to provide a myriad of solutions to current (and future) business problems that entities of all industries and sizes face.

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