In the last few years, we have witnessed a few biggest frauds in the banking and financial sector worldwide. Either with $639 billion in assets and $619 billion in debt, Lehman’s bankruptcy filing or the $1.8 billion Indian bank loan fraud in recent years was the big eye-opener. Federal Services Royal Commission (Australia) found that the Home Loans were being given based on fraudulent documents and recently, CNBC has reported* Mortgage fraud risk jumped more than 12 per cent year over year which measures six fraud indicators: identity, income, occupancy, property, transaction and undisclosed real estate debt. All of these fraud cases not only lead to losses to the banks but also increase their operational costs. This seems to be more common for Collateral which is Properties, Factories and Machinery. Banks need to hire agencies to validate the collaterals, agencies to value the collaterals, agencies to validate the titles and so on This has increased the operational cost of banks while adding extra layers of complexity and regulation to the process of lending and borrowing.
The highest number of fraud cases is in the banking and financial services (17.8%), with a median loss of $200,000 (ACFE, 2014).The U.S Federal Bureau of Investigation (FBI) classified banking institution fraud as tier one strategic priority in its investigation planning (U.S. Department of Justice Report, 2001).
What if there could be a system which is tamper proof, can maintain public history of transactions in real time and once a transaction (financial / nonfinancial) is posted is irreversible?