Ireland: Blockchain: Building Trust In A Trustless System?

Last Updated: 28 August 2019
Article by Audrey Lynch and Adam McCarthy

A degree of trust between parties is required in legal transactions. However, if an immutable record of data existed, we could eliminate this dependency on others. Blockchain technology aims to do just that by using a decentralised network. With no central authority, it is incredibly difficult to alter the data inside a ledger. A user would have to control over half of the platform to create a consensus. This fundamental principle leads to a secure system. As a result, certain industries are moving their processes over to this new technology, particularly those that require a greater degree of trust.

Combating Money Laundering

The global money laundering industry is thriving and is estimated to amount to up to $2 trillion per year. In 2012, HSBC Bank was fined $1.9 billion for violations of anti-money laundering regulations in Mexico. Two years later, the French bank BNP was charged $8.9 billion dollars for concealing over $190 billion in transactions for clients who were subject to US sanctions. Failing to adequately maintain anti-money laundering (“AML”) procedures can be an incredibly costly mistake. However, maintaining these procedures is expensive and time consuming. Know-Your-Customer (“KYC”) requests can often take up to fifty days to complete. Blockchain has the potential to reduce costs and delays in this field.

Regulators are seemingly resistant to new approaches to combat this epidemic, often encouraging banks to simply hire more manpower to meet AML requirements. However, it is evident that current risk management systems are not always able to track complex transaction trails, particularly where cross border transactions are analysed at a national level.

Due to the immutable nature of blockchain, it’s possible for investigators to trace a history of transactions more easily than with current processes. Algorithms would be able to identify patterns and analyse data to determine the risk of a specific transaction. Although it’s not impossible for a centralised system to do the same, an army of compliance staff would be necessary.

While blockchain technology won’t revolutionise the KYC process, it can enable financial entities and law enforcement to verify credentials in a timelier manner. KYC can be expanded to include a reputational score too. However, this approach cannot prevent fraud where fake or stolen credentials are used to open accounts.

A current obstacle for blockchain to overcome is persuading participants of its trustworthiness. Decentralised systems are essentially “trust-less” since there is no central authority, so decisions are driven through logic and consensus. This is a new and often unsettling ground for businesses to explore. A possible counter to this are distributed ledger technologies like Corda, which allow the company to control who can see certain information.

Conveyancing

Blockchain technology can be used to monitor more than just financial transactions. The implications of blockchain technology for conveyancing are huge. Experts in the field claim that blockchain technology can reduce transaction times from the typical three months, down to three weeks. The process has the potential to remove a great deal of paperwork.

ClickToPurchase, a platform for buying and selling property online, completed the first online property transaction by blockchain. In one week, the platform saw a home go from initial marketing to a verified online exchange. Over one in three property sales fall through, and nearly 30% of that is from slow sales progression and conveyancing issues. With delays causing stress or even a collapse of the sale entirely, hastening this process is a vital development in the property market.

Registered properties with no significant charges or covenants are well-suited to a blockchain platform. However, a considerable amount of land in Ireland remains unregistered, and many properties have complicated titles and historic obligations. In those cases, expert legal advice is necessary and blockchain technology will not suffice.

Banking in the Modern Age

A recent use of blockchain is to establish trust in the banking sector. A collaboration between the Institute of Banking, various Irish banks, and Deloitte are developing a new financial services industry education platform, providing a single view of employee competency and talent frameworks. The platform is a first of its kind in Europe. Employees can access their digital wallet which contains their credentials. This will result in reduced costs and risk, while also meeting the Central Bank’s Minimum Competency Code and Fitness and Probity regimes. It has been built by Deloitte’s EMEA blockchain lab, a Dublin-based development hub that advises financial services clients on the application of blockchain solutions. The immutability of blockchain’s data is a key reason that the platform was chosen. It is inherently difficult to manipulate, thus keeping employee records secure.

The Right to Erasure under GDPR

Personal data in an immutable data trail is problematic when considered against the new requirements of the GDPR. Article 17 states that the controller of the data can be requested to erase an individual’s personal data. It’s often not practicable to erase data from a blockchain, since the various nodes would have to cooperate and re-build from before that data was added. Another method might be data redaction, where sensitive data is removed or replaced, but this poses challenges of its own. It is important to note that the right to erasure under Article 17 is not an absolute right and Article 17(1) (a) states that the data can be erased only in the situation where it is “no longer necessary in relation to the purposes for which they were collected or otherwise processed”.

The prospect of a Memory Optimised Flexible Blockchain might solve this issue. This is where data can effectively be removed from the blockchain, but if there is a dispute it can be verified via its hash. A practical example of this infrastructure would be if a homeowner wanted to verify that a break-in took place under a previous insurance policy, they could provide a private copy of the data with its associated hash. A legal authority could compare the hash with what is stored on the blockchain, thus validating the claim.

Conclusion

Blockchain is showing promise in many industries. As discussed in this article, blockchain has the potential to combat money laundering, streamline conveyancing practises and store employee credentials. Implementing blockchain technologies can provide an impartial, automated, and efficient intermediary. However, it does come with some caveats. Privacy is a growing concern in modern society, and it will take some clever engineering and compromise to meet the necessary standards. With everything considered, is society ready to trust this new technology?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions