Wecan Comply: How to use the Hyperledger Fabric blockchain for real-time compliance auditing

The state of compliance today

Compliance today is hampered by a real lack of coordination between its various players. Indeed, each actor uses its own processes and tools. Some have invested in technological innovation while others continue to use more traditional methods. The situation is such that nothing has yet been really proposed to facilitate compliance exchanges between external asset managers and their custodian banks.

The administrative workload is heavy and is increasing: the list grows daily, with a new regulatory alert in financial services alone issued every seven minutes according to Thomson Reuters Regulatory Intelligence. And it is estimated that 15 to 25% of a company’s revenue is wasted because of poor data quality and management says Experian plc. Indeed, information is, most of the time, structured internally but exchanged externally by mail, email, phone or fax in a very inefficient and unsecured way. For EAMs, onboarding at a custodian bank therefore requires several hours of work: the announcement process carried out at all the custodian banks, which can go up to more than 50 hours, is still very manual today.

In addition, the annual review (partial or complete) of the relationship with the bank is an important process for the bank and requires administrative verification work that can take several months.  

Compliance efficiency thanks to blockchain

The administrative burden caused by the duplication of compliance processes will be considerably reduced, thanks to blockchain. It will make it possible to digitize and streamline the management of information, thus avoiding many errors. Bockchain technology will enable independent managers to implement much more reliable, smooth and secure operating procedures.

The Wecan Comply platform makes it possible to digitize and standardise the information exchanged between financial players in order to facilitate and streamline exchanges between banks and independent asset managers in a secure manner. The objective is to enable financial players to pool their resources on non-competitive and non-differentiated subjects in order to improve auditability and, eventually, to automate it. This will not be available immediately, but the Wecan Comply platform will soon be linked to official registers. Managers will thus be able to ensure that their custodian banks have direct access to all kinds of official documents, without having to worry about collecting and processing them. By skipping these verification steps, they will be able to save time while limiting the risk of fraud.

The Blockchain Association for Finance: a unique compliance network

Wecan Comply is an ambitious project aimed at optimizing compliance processes. It is the first blockchain infrastructure addressed to Private Banks, thus significantly opening up the prospects of use cases. Several banks and independent asset managers have already joined this unique network: Pictet Group, Lombard Odier Group, Edmond de Rothschild, REYL Group, Hyposwiss Private Bank Genève SA, Gonet, Banque Cramer, CAPITALIUM Wealth Management, PLEION Gestion de fortune, and Fransad Gestion SA. In order to carry out this project, Wecan Group has created an industry standard that meets the best regulatory requirements set by regulators. With a view to ensuring neutrality and the proper functioning of the platform, the members of the network have created an association: the Blockchain Association for Finance.

Systematic and real-time compliance status

The platform allows EAMs and banks users to track and receive real-time alerts for all changes to ensure the compliance of documents and information shared. It monitors, reports and analyzes events and changes while ensuring the security of the environment thanks to Hyperledger Fabric. This solution enhances the security by allowing the user to instantly know who made a specific change, when, and from which entity. Since the data stored is authenticated by multiple institutions and continually up to date, the compliance offices have a real-time reporting of the compliance status and can share it at any time to the management or the external auditors.

Custodian banks save time by accessing in one place standard and structured information coming from their EAM. And they have a real-time compliance status linked to all data. Wecan Comply solution drives efficiency and cost effectiveness, reducing the painful administrative work. Banks are processing top-notch quality of data since all information is validated by other banks of the network. All exchanges are digital, onboardings are faster and there is a real-time auditability of all modifications.

Why we choose Hyperledger Fabric

Wecan Comply uses Hyperledger Fabric, an open source blockchain platform for enterprises hosted by the Linux Foundation. Hyperledger Fabric enables private actors to exchange information while retaining ownership of their data. Each party is clearly identified, and every transaction is authenticated, authorized, validated and tracked.

Thanks to Hyperledger Fabric there is no central administrator: each bank and EAM controls its own information in a fully encrypted and secured network. As a solution provider, Wecan Comply does not have access to the information exchanged. It is only powering the network. Hyperledger Fabric offers a high level of security by ensuring that data access is only made after the user’s private key has been verified by the system. This eliminates the chance of unauthorized access and gives individuals greater control over their information. In addition, the platform is certified by a zero-knowledge proof technology that allows to protect the privacy of all users and to decentralize data control and sharing.

The world of compliance tomorrow

The union of financial players within a network offers good prospects for development.  In particular, data exchange among custodian banks, regulatory bodies and auditors will benefit from significant gains in efficiency.

The next step for Wecan Comply is the connection to the official registers that will create a real ecosystem around compliance and thus release all the value of the platform. Wecan Comply was initiated with and for the actors of the financial industry. Our ambition is then to apply this method to all regulated professions where there are standards in order to guarantee a monitoring and audit of compliance in real time.

By Vincent Pignon, Omar El Mansour and Justine Latta

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