The law enforcement agencies can reap a significant amount of benefits from blockchain data. The features like immutable ledger, traceability, decentralization, and high-grade security systems make blockchain technology a useful alternative to many other technological systems. Therefore, law enforcement agencies along with investigating agencies can strengthen asset recovery, gauge risk management, and follow compliance better by using this technology.
Compliance and Risk Management By Using Blockchain Data
Blockchain technology can support many law enforcement agencies in dealing with different types of risk. The domain of risk management usually deals with assessing, identifying, averting, minimizing, and confronting risks while doing business. Therefore, blockchain data can help in risk assessment in multiple ways such as the following:
- Detecting and observing irregular or suspicious transactions that may indicate money laundering.
- Verifying customer profiles to check whether there are any reliable connections with risky entities, illicit activities, and restricted jurisdictions.
- Assess risks emerging from common cyber threats such as ransomware.
- Pinpointing sources of funds from mining, exchanges, and mixers.
- Observing exposure to barred or sanctioned exchanges and addresses
Combating Transnational Crimes By Using Blockchain Data
Blockchain technology can help different law enforcement agencies by combating transnational crimes and reducing the chances of fraud and terror financing. Hence, these are some features of this technology can be used for averting crimes or minimizing their impact. Thus, these are some of how technology can resolve these problems.
- Quantify exposure to exchanges and restricted addresses
- Monitoring customer profile deviating from activity divergence
- High-risk jurisdictions and financial analysis
- Unexpected activities from customer profile
- Indicators of unlicensed VASP activities
- Cluster analysis involving transactions from one wallet to another
Enforcing Regulations
Blockchain technology can help in supporting regulatory environments. Therefore, the advanced features can help in prioritizing higher-risk entities for better compliance. The major applications include:
- Identifying risky activities by analyzing wallet addresses in undisclosed or remote locations
- Tracking the flow of funds from regulated exchanges to unlicensed mixers
- Reviewing and verifying suspicious transaction alerts
- Authentication of customer wallet addresses
- Estimating the percentage of customer transactions in AML reports
Also Read- A Brief Overview of International Crypto Regulations
Bottom Line
Blockchain technology helps in better law enforcement than other types of technologies. It has the potential to offer a superior auditable system of record-keeping for digital assets. Thus, security features such as cryptography allow users and investigators alike to check whether data was created or manipulated. It can play a positive role in risk assessment and avert many kinds of risks for different business entities. Moreover, the decentralized feature also guarantees better impartiality for investigators and law enforcers since it is free from influential centralized institutions.
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