PwC partner Vikas Agarwal explains how blockchain solutions can fight blockchain-related crime


As blockchain and digital currencies grow in popularity, we see more and more people trying to use both technologies to bypass regulations and law enforcement agencies. The increase in individuals wanting to use digital currencies to circumvent the law has resulted in many innovative solutions such as:

We recently had the chance to speak to Vikas Agarwal, a partner at the four major consulting firms PricewaterhouseCoopers (PwC) and the head of PwC’s financial crime practice. In our conversation, we learned how senior consulting firms and financial crime units have performed over the years in relation to digital currency cases, how they are addressing these cases and what they think are the best solutions for them through the blockchain and digital currency caused problems.

Agarwal and his team are responsible for helping clients in the fintech, finance and payment services industries build and manage efficient and effective compliance programs that meet regulatory requirements without compromising the customer and employee experience. As blockchain and digital currencies grew in importance, Agarwal’s team began to see an increase in the number of blockchain and digital currency-related cases that hit their desks.

“For several years now, we’ve been helping crypto service providers understand compliance obligations and build robust programs,” said Agarwal.

“One of our first engagements was 5 or 6 years ago when a leading crypto provider asked us to evaluate its financial crime commitments. That was when the room was still new and regulations were emerging. “

Since then, blockchain and digital currency-related cases have continued to wander through PwC’s financial crime department, to the point that Agarwal and his team noticed a minor trend or more “common” cases.

“Some of the most memorable are when we are able to identify a bad actor making transactions across multiple virtual assets in order to avoid detection. We saw some of them and helped our customers identify them, ”he explained. “One of the others involved using proxies to register with crypto domains that hide identity. Followed by the use of hardware to transfer crypto across international borders, convert it to crypto with higher anonymity and then exchange it for illegal products. “

How blockchain can be used to prevent cybercrime

But just as blockchain and digital currency can be used to facilitate crime and circumvent regulation, blockchain technology can also be used to prevent this type of cybercrime and to apprehend the criminals.

“When properly channeled, blockchain technology can be used to prevent money laundering. Every transaction that is carried out leaves an audit trail that cannot be changed. The origin of the funds can be determined very well. In short, a blockchain model is a solution to the problems caused by the same technology, ”said Agarwal.

Blockchain creates a public, immutable and auditable ledger, which means that everything a person does with a digital currency is forever logged on the blockchain. What can be tricky is identifying the person (s) who own or operate a digital currency address that is used to facilitate crime. But luckily, there are a multitude of blockchain analysis tools and financial crime teams out there to help their clients pinpoint the source of illegal activity.

When asked what some of the best solutions to blockchain and digital currency crimes are, Agarwal said:

“A culture of compliance and threat monitoring backed by advanced analytics – it is important to recognize that crypto users are looking for alternative transaction routes. While we want them to be protected, we also want to make sure that the customer experience is preserved and that we enable business growth. “

Agarwal also believes that blockchain-based solutions can fight the blockchain-related crime that we see a lot.

“With the help of blockchain technology, robust KYC processes can be established that can facilitate data exchange in real time and reduce processing costs. [It can be used to create] a robust identification mechanism: individual accountability can be established using blockchain technology by ensuring a verified identity for each party. The individual will then be responsible for every single action. “

“Blockchain-based AML solutions can leverage the power of smart contracts to facilitate the creation of algorithms to automate fraud detection processes. And we can avoid the operational overhead by sequentially programming a series of requests at each stage to automatically block transactions based on red flags we define. The power of the blockchain in conjunction with intelligent contracts helps us to gain immense control and oversight over every single digital currency transaction that is carried out. “

Agarwal and his team at PwC even tested some blockchain solutions in their department.

“We have an audit platform based on blockchain. As a team, we are looking for ways to use AI to develop better solutions for monitoring financial crime and detecting malicious actors. There are many solutions out there that will help solve some of the common problems we observe, however [this] Space is constantly evolving, ”said Agarwal.

“Digital transactions are often anonymous and usually do not require typical banking channels to carry out transactions, which increases the complexity. The data on blockchains is immutable. The in-house developed AI models were able to recognize patterns in large amounts of data that cannot be captured by a rule-based engine. These algorithms adapt to changes in criminal activity and learn from trends / patterns, ”said Agarwal.

  1. The availability of open source technologies enabled us to save license costs
  2. The improvement in the detection patterns reduced false positives, thereby reducing the operational burden, and
  3. The AI ​​models are self-learning and can reveal patterns that cannot be recognized with conventional systems. When these AI models are coupled with blockchain concepts, we can build a robust system by harnessing the power of decentralization, transparency and immutability that blockchain brings with the self-learning ability of AI models.

Although blockchain and digital currencies are still emerging technologies, they have a bright future ahead of them. While a fraction of the world is interested in using these technologies to facilitate crime, an even larger percentage is interested in using blockchain and digital currencies to find innovative solutions that increase efficiency in a wide variety of industries. What Agarwal finds most promising about the blockchain is its ability to bring transparency to the industry.

“Blockchain use cases are enormous. The properties of immutability and transparency ensure that not just the AML aspect, but the entire monitoring lifecycle, from setting up robust KYC processes to performing AML monitoring using smart contracts. A disadvantage of this concept is the adaptability on a large scale due to the costs involved (e.g. Ethereum gas fee), with the majority of actors in this area operating at the proof-of-concept level. ”

“Given the stringent PII requirements for traditional banking systems, the process needs to be mature. Nevertheless, it is worth borrowing and adapting the technology, as it brings enormous scalability, immutability, adaptability, decentralization and transparency with it. Distributed ledger technology ensures that more transparency can be created between different stakeholders, including financial institutions and regulators. “

Blockchain and digital currency have the potential to optimize many industries, the inherent properties of a blockchain such as low transaction fees, transparency and scalability in the case of the BSV corporate blockchain can be implemented in a variety of sectors to reduce operating costs and increase operational efficiency. Agarwal believes that blockchain and digital currencies will have their place in the world, but admits that the industry must mature before we see widespread implementation.

New to Bitcoin? Check out CoinGeeks Bitcoin for beginners Section, the ultimate resource guide for learning more about Bitcoin – as originally envisioned by Satoshi Nakamoto – and blockchain.

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