How does Blockchain prevent corporate financial fraud in ways that modern technology has failed?
Despite recent technological advances, corporate financial fraud still seems to occur at stunning rates. Estimates gage that American businesses continue to lose over $50 billion a year (approximately €41 billion a year) due to employee fraud, according to Statistic Brain.Before the age of digital record keeping, prenumbered documents were used to cut down on fraud. Think of your checkbook for example. Each check is numbered in sequential ascending order usually starting at 101 or 1001. When you write a check, you record the check number in your journal or ledger. This way it is easy to notice when a check is missing. Businesses used to use this same method with sales receipts. In fact, they still do; it is just digital. Every sale is assigned a unique number that is printed on the receipt.There seems to be an assumption that the digital age, up to this point, has made financial transactions more secure. Surely it has made transactions more efficient, but it has also led to more opportunities for financial fraud. For someone who knows what they are doing, it is not hard to override the accounting software, delete a cash transaction and pocket the change.The digital age has also allowed programmers to embezzle money using the ‘salami technique.’ When compounded interest is calculated daily, it sometimes returns a number that represents a fraction of a cent (i.e. €0,0149). One could theoretically write a program that would reroute the fraction of the cent (€0,0049) to a dummy account controlled by the programmer. While a fraction of a cent does not seem like a lot, collecting it from thousands of accounts on a daily basis yields a high return. Before the digital age, it was impossible to steal fractions of a cent.It is clear that corporate financial fraud can still occur due to security flaws in the design of modern systems.
How Technology Could Be Detecting Fraud Easier
Blockchain was designed differently. Blockchain was originally designed to record the transactions of cryptocurrency and digital currency such as credit cards, peer-to-peer transfers, etc.How does Blockchain prevent corporate financial fraud in ways that modern technology has failed?For each transaction that occurs, a new ‘block’ is created. The block contains encrypted data about all previous transactions that came before it, also known as the ‘hash’. If one ‘block’ in the chain is altered in anyway, the chain will become invalid. Since the Blockchain uses ‘digital signatures’ to track each user’s activities, whoever makes a change (i.e. deletes a cash transaction) will be immediately detected. Finally, every participant in a transaction has access the chain. The transparency allows for strict scrutiny and accountability.Neurochain specializes in Blockchain development and can help protect your company from corporate financial fraud through Blockchain integration.