A Blockchain Use Case for Cheque Fraud is here

Just when we thought chequebooks and cheque processing was on its way out , we see a unique use case where the traditional banking instrument uses  new age disruptive technology such as blockchain to combat cheque fraud.

Cheque fraud accounted for nearly 77% percentage payments fraud in the US alone in a survey conducted in 2015 by AFP . Almost globally the largest revenues impacted in payments fraud are via cheque fraud.

Emirates Islamic, one of the leading Islamic financial institutions in the UAE, announced that it will introduce blockchain technology into its cheques as a fraud prevention measure.

Earlier this year , Emirates NBD had announced the ‘ Cheque Chain’ initiative . There will be a Quick Response (QR) Code on each leaf which enables validation at the source through self service or at the presenting bank . The QR code will be registered on the blockchain so that once the cheque leaf has been presented and cleared under the bank’s ICCS technology , the record will be maintained on the blockchain for auhenticity .

With ‘Cheque Chain’ , Emirates Islamic becomes the first Islamic bank in UAE to undertake this initiative to enhance security in the popular payment method.

Emirates Islamic announced its plan to issue new cheque books carrying a unique QR (Quick Response) code on every leaf, along with a string of 20 random characters to make new cheques being issued compatible on the new platform.

This is an extremely smart move to combat the ever increasing costs of image based clearing and instrument handling coupled with archival and storage of the information . It will be interesting to see how cancelled cheques are handled on the platform and in the long run how the total cost of ownership for institutions span out with blockchain .

References :

http://emirates-business.ae/emirates-islamic-to-integrate-blockchain-tech-into-cheques/

http://www.khaleejtimes.com/emirates-nbd-unveils-cheque-chain-to-curb-potential-fraud

https://www.finextra.com/newsarticle/30500/emirates-nbd-integrates-blockchain-tech-into-cheques

 

Union Bank’s $171 million Wire Fraud – A Wake Up Call 

The Union Bank of India had reported a case of cyber attack on one of its nostro accounts last year on the 21st of July. At that point , the amount remained undisclosed and the breach was said to have happened from an email attachment opened  by one of its employees.It was a phishing attack. An email with the handle @rbi.org.in had an attachment -a zip file with a .xer file.While one employee fell pray, some were smart to report it as suspicious. However, it was too late.The malware had entered the bank.

A sum of $171 million had been debited from its nostro account with Citibank  New York .Since Swift recon happens only the next day once the nostro statement comes in , the bank’s treasury department realised only the next day.

The money by then had been moved to accounts in two banks in Cambodia—the Canadia Bank Plc and RHB IndoChina Bank Ltd, besides the Siam Commercial Bank in Thailand, Bank Sinopac in Taiwan, and a bank in Australia. These funds were routed by Citibank New York and JP Morgan Chase New York, which hold UBI’s foreign exchange accounts.

Source Hindu : UBI Cyber Attack

SWIFT maintains a neutral stand in the investigation primarily initiated by UBI and insists no breach at its end.However , it is high time that SWIFT looks at its loopholes -recon delays , lack of built in fraud early warning mechanism and an AI powered neural network enabled clustering system that can track such suspicious activity. 

With blockchain heralding a new age of cryptographic security and unit level transparency the bank’s must also look for alternatives to the wire transfer monopoly and it’s inherent loopholes.

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