sharing the knowledge

expanding SWIFT for next-generation compliance

by Jem Shaw

A ground-breaking but simple technique to improve the effectiveness of AML/ATF/KYC processes is being made public by its developers.

Bob Blower, CEO of Clarency, explains why. "What we're doing is very simple - it just involves embedding an access code in the MT103 section of the SWIFT message - but it opens up limitless possibilities for improved diligence and safer, cheaper transactions.

"It would be tempting to keep our method secret for commercial advantage, but that would go against our declared aim of making global trade safer and fairer for everyone. so instead we're revealing the technique to everyone, be they partners or competitors."

essentially the world's financial compliance data is communicated via a Twitter message

While modern diligence techniques have undeniably improved our ability to know or customers and their customers, associates and marketplaces, the means of sharing that wealth of information remains limited. The SWIFT messaging system is the universal financial communication medium used by financial institutions across the world. It provides a secure industry standard by which the world's transactions have been conducted for more than four decades. But its capacity for conveying background information is limited to 140 characters. Essentially the world's financial compliance data is communicated via a Twitter message. This leads to wasted effort and delay, while increasing the possibility of bad actors avoiding detection.

Clarency's technique extends the capability of the SWIFT message to carry unlimited background and transactional data, allowing all authorised counterparties in any deal to access detailed and verified information. It's done by embedding a smart code into the payment details field. Recipients can then use this code to access full transaction and background information on an associated blockchain*.

"The secret sauce - which we're not intending to keep secret - is in that access code," says Clarency CEO, Bob Blower. "Behind those twenty-odd characters is an array of cryptography and verification so sophisticated that even we, who invented it, can't view the associated information without authorisation from the data controller. It handles user control, data expiry, right-to-be-forgotten and more from within a compact code that can be easily dropped into a standard SWIFT message."

Clarency's deployment of the system was developed in concert with InterlockLedger, whose next-generation blockchain platform is not only more secure than existing systems, but is also vastly more energy-efficient. By removing the need for large networks of cooperating computers, it saves energy, improves speed and greatly enhances dependable availability of enterprise-critical information. The company's ab initio experience of the process should make them the first port of call for companies wishing to develop their own information-sharing KYC. However, the technique is technology-agnostic and can work with virtually any secure storage.

"We're eager to advise banks, fintechs or any other SWIFT member on how to quickly and easily share data to the benefit of real-time compliance," says Bob Blower. "We invite anyone looking to make strides in transactional transparency to contact us, and we'll be happy to share our experience."

* While linking is possible to a normal web-based database, we strongly advise the use of a second-generation (or better) blockchain for security and immutability.

Clarency 'C'

Clarency Singapore PTE. LTD. Guoco Tower, 1 Wallich Street #14-01, 078881 Singapore   +65 6403 3956