Markets

Combating Corporate Misconduct: Is Blockchain the Answer?

By Josh McIver, CEO of ULedger

Lightning almost never strikes in the same place twice. However, with regard to the recent influx of corporate scandals plaguing headlines, you might be surprised. In fact, it’s becoming increasingly self-evident that heightened access to personal data has opened the floodgates to corporate abuses at all levels of the corporate ladder, with inadequate transparency leading to infringement allegations against even of the most ethical brands on the market. The general public is growing frustrated with the status quo, and this is no more apparent than when discussing corporate lending abuses perpetrated by the world’s most prominent insurance companies.

At present, the insurance industry is in a state of limbo. Now nearly a decade after the 2008 financial crisis, most companies are just beginning to step away from the spotlight after years of operating under immense regulatory scrutiny. While this is certainly promising for the future viability of the industry, the pursuit of rapid expansion has prompted many senior executives to incorporate unreasonable sales quotas into already high-pressure working environments, encouraging unethical behavior that has once again caught the attention of government agencies.

In April, Wells Fargo, the second largest bank by market capitalization, was recently implicated in the latest in a series of long-standing ethics violations from major lending companies including AIG, Deutsche Bank AG, and American Financial Group. Faced with allegations from both the U.S. Consumer Financial Protection Bureau (CFPB) and the U.S. Office of the Comptroller of the Currency (OCC), Wells Fargo agreed to a staggering $1 billion USD settlement, acknowledging that it had “failed to implement and maintain a compliance risk management program commensurate with its size, complexity, and risk profile.”

As regulators work to determine the exact scope of the company’s infringement, the ongoing saga of lending fraud in the United States paints a grim picture about the current state of centralization in our society. What does it say about the integrity of our commercial ecosystem if we cannot trust the insurance companies that are, by nature, supposed to protect us from the unexpected? And, similarly, for companies with detailed histories of ethics violations, what steps can we take to ensure that lightning, in the form of corporate misconduct, doesn’t strike twice?

The time for change is upon us. As corporate scandals continue to emphasize the inherent problems with traditional banking processes, many industry experts are beginning to look toward advancements in blockchain technology to demand greater accountability and transparency from an increasingly opaque system. In searching for a path forward, I argue that it’s first important to better understand the origins of misconduct so that we can build upon lessons-learned to create a foundation for future success using blockchain.

In almost every corporate scandal, the root of infringement lies in a given company’s inability to properly identify and mitigate wrongdoing. Company executives implement check-the-box compliance protocols that are rarely reinforced with regular training, and, as a result, unethical employees tend to fall under the radar. Don’t be fooled. No matter how insignificant a problem may seem, 1,000 tiny infringements will still add up to a substantial infringement in the eyes of a regulatory body. However, with blockchain, we can finally bring these practices to light by providing the general public with the tools necessary to maintain transparency across a variety of exchanges.

If you’re not already aware, blockchain is a decentralized, immutable ledger of transactions that can be accessed from anywhere in the world. If you own a computer, and you’re a part of the system, you have access to the record. For insurance holders, this is hugely significant. Imagine the potential of getting an insurance policy, either for a house or a car, and being able to immediately cross-reference your estimate with an entire record of other estimates. The resulting infrastructure puts the power back into the hands of the people to make informed decisions, which is a fundamental aspect of a free and transparent exchange.

Additionally, despite the unfounded assumption that government agencies and blockchain-based companies will never be able to coexist, I predict that blockchain technology will be an incredibly powerful regulatory tool to ensure compliance. As many can attest, blind enforcement does little to thwart bad actors from taking advantage of the system — especially if those bad actors are major multinationals with deep pockets. However, through blockchain, regulators can tap into an entire database of verifiable information in real time, guaranteeing that inconsistencies are addressed head-on instead of being swept under the rug.

At ULedger, we are to leveraging the power of the blockchain to provide our customers with an immutable history of their data, while at the same time allowing their data to remain private and protected, reinforcing the exchange with a tamper-proof record of their content that is verified by other participants on the platform. No longer will companies be allowed to create fraudulent credit lines, or impose unjustifiable lending requirements. The community is watching.

Looking to the future, executives should see this as an opportunity to take a hard look at their compliance policies and implement innovative strategies to mitigate risk. In truth, a settlement that is not followed by a concerted effort to remedy the problem is simply an empty gesture. It’s time that we demand more from the companies we trust. Luckily, through blockchain technology, transparency is only a click away, and users that once suffered the consequences of infringement can ensure — once and for all — that lightning will never strike in the same place twice.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.