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The power of blockchain data analysis to safeguard FIs in Switzerland

A photo of Madhumita Jha
Madhumita Jha

Senior Manager, Financial Services Forensics | EY Switzerland

4 minute read 20 Sep 2023

As digital assets grow in importance, financial institutions are embracing blockchain data analysis to mitigate risk – and remain compliant.

In brief 

  • Growing exposure to financial crime using crypto warrants immediate action.
  • Blockchain data analysis empowers institutions to detect and prevent illicit activities.
  • The rising interest in CBDCs requires robust data analysis to manage risks and compliance effectively.

In this era of rapid technological evolution, the financial landscape is gearing up for the adoption of digital assets and blockchain technology. With new technologies come new challenges, particularly in the realm of financial crime and compliance. For financial institutions in Switzerland, staying ahead of the curve is of utmost importance, especially given the changes in global political atmosphere. How can they navigate the complexities of digital assets, ensuring compliance with recent regulatory measures while effectively combating growing exposure to money laundering, illicit activities and terrorist financing? The answer lies in harnessing the power of data analysis on the blockchain.

The increasing adoption of digital assets has exposed the financial industry to growing risks. Criminals exploit the pseudonymous nature of blockchain transactions, making traditional detection methods insufficient. As financial institutions in Switzerland face these evolving threats, data analysis on the blockchain is emerging as a powerful tool to protect their interests and maintain regulatory compliance.

How EY can help

A look at the regulatory landscape

Globally, financial authorities have been quick to respond to the emergence of digital assets. The European Union (EU), China, the US and Switzerland have all implemented measures to mitigate risks and safeguard financial systems. The EU’s 5th Anti-Money Laundering Directive (5AMLD) now includes provisions on digital assets and wallet service providers, mandating financial institutions to carry out stringent customer due diligence when dealing with digital assets. Similarly, the United States’ Financial Crimes Enforcement Network (FinCEN) has clarified the obligations of digital assets businesses under the Bank Secrecy Act (BSA), emphasizing the importance of adherence to AML and KYC regulations.

In Switzerland, the Financial Market Supervisory Authority (FINMA) has been proactive in providing guidelines for the digital asset industry, fostering a conducive environment for innovation while upholding the integrity of the financial sector. However, these measures are only as effective as the means by which financial institutions analyze blockchain data to detect and prevent financial crime.

The power of data analysis on blockchain

Blockchain technology presents a unique opportunity for financial institutions to fortify their defenses against financial crime in the realm of digital assets. The decentralized and immutable nature of the blockchain offers a transparent and auditable ledger of all transactions, making it a valuable resource for data analysis. Some key benefits include:

Growing interest in CBDCs

Central bank digital currencies (CBDCs) have garnered significant interest worldwide as central banks explore the possibilities of digitalizing fiat currencies. CBDCs promise to improve financial inclusion, reduce transaction costs and enhance cross-border payments. However, their implementation comes with challenges, including privacy, security and regulatory compliance. Data analysis on the blockchain becomes indispensable in navigating the complexities of CBDCs while managing associated risks.

Summary

As financial institutions navigate the evolving landscape of digital assets and distributed ledger technology, the power of data analysis on the blockchain emerges as a decisive advantage. By embracing advanced analytics, financial institutions can protect themselves against growing exposure to financial crime through digital assets, ensuring compliance with recent regulatory measures. Furthermore, when CBDCs become a focal point for the financial industry, data analysis will prove invaluable in advanced risk management and in securing a seamless integration of digital currencies.

Acknowledgement

We kindly thank Joby Jose for his valuable contribution.

About this article

A photo of Madhumita Jha
Madhumita Jha
Senior Manager, Financial Services Forensics | EY Switzerland
Expert in supporting clients during business-not-as-usual situations like fraud and financial crime. Nature lover.
Related topics
Blockchain
Forensics
Risk
Financial services

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