Online fraud has been a significant concern for most enterprises globally. In 2017, it ranked among the leading operational risks. However, a cutting-edge technology, blockchain, offers efficient anti-fraud solutions.
A study by the Association of Certified Fraud Examiners indicates that a standard entity loses about 5% of its income to fraud annually. Usually, detecting fraud in a business isn’t a piece of cake. The following three blockchain anti fraud features are critical to any investment.
A blockchain is a distributed ledger with vital transaction data. It continuously shares and reconciles the data to a network, thereby eliminating failure. Also, it spreads authorization and management throughout the system hence preventing a fraudster from starting a dubious scheme.
Fraudsters use various methods to hide their illegal activities. A shared ledger aids in minimizing fraud as it enhances the transparency and visibility of an investment’s transactions. Designated users can review a history of various financial transactions. It eases the identification of unclear sales.
Blockchain records immutable transactions that one can’t quickly alter or delete. Before it appends the deals, network users should validate the purchase through a consensus. They then give the blockchain a timestamp. Also, they use cryptography to secure the stamp then later they link it to a precedent block. Though one can create a new record to alter an asset’s state, they can still access the original file. Therefore, using blockchain enables you to view an asset’s provenance, ownership, current location and its legitimate owner.
You Can Permit Blockchain
Since most investments usually deal with sensitive data, they restrict its access. They create security measures to prevent outsiders from reaching and corrupting their transaction records. Permission blockchain networks determine who will take part in a system and to what extent. Furthermore, it invites and validates the permission network members before making their contributions.
In an ordinary permission network, identity management and access control are essential. Hyperledger Fabric, a blockchain framework, issues the participants with cryptographic cards to prove their identity. They help in regulating access to confidential information.
3 Ways in Which Blockchain Reduces Internet Fraud
Fraud in Finance
There are several factors which complicate most financial transactions including collaterals, currency denominations variation, settlement time and third-party mediation. Usually, fraudsters target multi-step process requiring human interaction.
Blockchain facilitates the timely sharing of information. Also, it ensures that all parties can update the ledger once they agree. It helps in minimizing costs, time and various fraud opportunities. Moreover, inter-bank financial transactions are prone to online fraud through credit cards and mobile payments. Payment fraud leads to an annual loss of $20 billion in all banks.
Due to increasing internet fraud, most credit card firms alert clients whenever suspicious transactions occur. However, criminals continue stealing and illegally using vital identity information.
Blockchain makes it possible to secure an individual’s identity. By placing it in a verified blockchain network, legitimate users can access it. Besides, it’s only known people who can validate the transaction records.
Fraud in Supply Chain
Supply chain fraud is as critical as that in financial institutions. Typically, supply chains are sophisticated, and they involve many people and movable parts hence creating opportunities of one to generate fraud without being detected.
Blockchain can help in preventing and reducing fraud in a supply chain by enhancing transparency. However, it’s tricky to manipulate as it is immutable. It’s only authorized network participants that can update or validate it. Besides, it’s easy to trace back a digitized product’s origin as a distributed ledger shares the information.
Although blockchains help in eliminating fraud, some thefts still occur. Mostly, blockchain systems are decentralized control centers. The infrastructure might leave gaps which permit unauthorized access.