Bitcoins BlockChain Drives Transparency

Bitcoin continues to come into the line of fire for illicit activity and anonymity, but neither issue is new for currencies. The ability to track and trace funds has been an ongoing issue, and is not restricted to blue collar illicit activities. Traditional currencies suffer from illegitimate connections, and little can been done to curb this issue.

“Can the U.S. government use the security thread or machine- readable features to track currency or detect it remotely? No, the machine features are intended for authentication purposes only; they will not set off metal detectors or similar devices. Individual bills are not traceable to individual users.”
— – The Federal Reserve Bank of Richmond

Experiments in tracking paper currency have been conducted in the USA and Europe. Where’s George? was started in 1998, and users can enter the serial codes of their bank notes and watch their journey on the website. At the time of writing this article, the site has recorded just over $1.3 million. “By entering this bill, you will help maintain the tracking of the journey this bill has made. Additionally, you will get back a list of all the cities, states, and countries where your bill has been recorded, as well as travel time and distance along its journey.”

However, the United States government is unable to track and trace their paper currency. Rumours of RFID chips implanted into the US currency have been touted around the internet, yet nothing official has come to light. Issues regarding mismanagement of US funds have cropped up in the past, and the inability to trace it’s ownership or use is not restricted to cartel crime.

In May 2003, economic sanctions against Iraq were ended by the Security Council with Resolution 1483. This was created by the Development Fund for Iraq (DFI) in order to administer proceeds from Iraq’s oil export, the UN’s Oil-for-Food Programme and other assets seized.

The DFI was placed under the Coalition Provisional Authority (CPA), and resolution 1483 called for the creation of the International Advisory and Monitoring Board for transparency and accountability of the DFI funds. Billions flowed into the DFI and transparency was not an area of focus.

The Andrews Air Force Base outside Washington received caravans and trucks on a recurring basis. The vehicles’ cargo was pallets of shrink-wrapped $100 bills, which were loaded on to Airforce C-17 transports departing for Baghdad.

In a memo to committee members of the CPA, questions arose as to what happened to the $20 billion that was sent to Iraq. Special focus fell upon the $12 billion sent over in pallets.

“Last Congress, the committee received over 14,000 pages of financial record and other documents from the Federal Reserve Bank of New York about the shipment of funds to Iraq. These documents, as well as records from the Department of Defence, show that between May 2003 and June 2004, the CPA spent or disbursed $19.6 billion, including $12 billion in cash.” – Memo to Members of the Committee on Oversight and Government Reform

Whether the funds made it into the hands of those who would use them to reconstruct the country, after the devastation of the war, is questionable. In a memo to CPA Committee Members, retired Admiral David Oliver stated that under the circumstances, transparency and accountability were not of primary interest for the CPA. When asked what happened to funds he responded in saying, “I have no idea, I can’t tell you whether or not the money went to the right things or didn’t  – nor do I actually think it is important.”

“The failure to account for the $20 billion expended by the CPA appears to have had serious consequences. Many of the funds appear to have been lost to corruption and waste. According to the Inspector General, thousands of ‘ghost employees’ were receiving paychecks.”
— – Memo to CPA Committee Members

What is of importance, for Oliver, is that the electricity supply was working again within eight days, and the major hospitals in Baghdad were operational once again.

KPMG one of the Big Four Auditors along with Deloitte, EY and PwC was called in as a third party auditor. Their findings were that the CPA had weaknesses controlling and monitoring the funds. “(i) lack of clearly defined roles and responsibilities and high turnover of CPA personnel, (ii) inadequate accounting systems, (iii) the non-adherence in a number of instances to the Program Review Board’s controls over spending allocations, and (iv) the uneven application of agreed-upon contracting procedures, including inadequate record keeping,” were some of the issues reported.

Specifically, KPMG noted that $774,300 in cash had certainly been stolen from a vault. The location and use of the remaining billions are yet to be determined, with exception of “$1.2 or $1.6” billion located in a rural bunker in Lebanon.

KPMG have recently been in the news for their connection with digital currency storage service Elliptic which is based in the UK. The auditing specialist awarded Elliptic ISAE 3402 accreditation, a Bitcoin Industry first.

The KPMG review analysed various aspects of the business, including financial controls, regulatory compliance including Anti Money Laundering (AML) and Know Your Customer (KYC) measures, code deployment, disaster recovery, segregation of duties and the offline bitcoin storage techniques specific to Elliptic.

In addition to this milestone, Elliptic have created software which they claim can identify where a bitcoin has come from. This would be a major stepping stone of interest for banks, and other financial institutions, who originally shied away from the digital currency. The ability for such software to add transparency to funds is attracting a variety of interested parties.

In the US, SABR is also attempting to add a layer on insight into blockchain technology. The New York based start-up is calling themselves the ‘Palantir’ of the blockchain. The term originally used for a magical artifact from J.R.R. Tolkien’s novels, a crystal ball used for communication and as a means of seeing events in other parts of the world.

SABR plans to run a consultation like service which will monitor how bitcoins are being spent, and who owns them. SABR has raised $1 million USD in their early stage seed funding round.

“To provide law enforcement with a view beneath the surface of multiple blockchains. SABR aims to ensure that bitcoin and other digital currencies are not utilized for illicit purposes.”
— – SABR’s Mission Statement

Using patented technology, SABR claim they will be able to assist authorities with the “blind-spot” created by bitcoin. The recent incarceration of Ross Ulbricht, also known as the Dread Pirate Roberts, took FBI officials years to achieve. According to online sources, SABR claims their technology could have completed the lengthy task within a few days.

Back in the UK a former MP is proposing a completely different use for blockchain transparency. George Galloway, who lost his seat for the Respect Party in May this year, is running as an independent for the Mayor of London. The politician wants to use blockchain technology to keep track of the City’s budget spending. “I want to throw City Hall’s books wide open and let the voters see how every pound is spent. Where is the money, where did it come from and where is it going?”

Galloway is proposing Mayor’s Chain, a 100 percent fully transparent and accountable public ledger. “With infinite scalability, the Blockchain budget can start from one small department, to replacing every bloated budgetary system currently in place in the city of London. The public will be able to see every transaction that’s taken place – there will be full disclosure of how much money is being spent, what on, with whom.” says the Mayor’s Chain Crowdfunding campaign on StartJoin. “We believe that we can make at least 5% savings from the approximated £17 billion annual budget – this gives almost £9 million revenue to spend on areas needing the help most.”

“London has a unique opportunity to lead the world in transparency, accountability, and creativity in 2016 with me as Mayor of London using this revolutionary technology, the Mayor’s Chain.”
— – George Galloway

London is racing to make their mark as the hub of Bitcoin. Perhaps an example will be made in the transparency of funds, and countries around the world can open up their books, allowing the public to decide if funds are being appropriately spent.