Blockchain, big data analytics, AI and other new technologies are transforming the way of working for governments, businesses and society. The 2019 Forum will focus on the risks and opportunities of new technologies for anti-corruption & integrity.
avatar for Helen Shan Jiang

Helen Shan Jiang

Winner of the 2019 ResearchEdge Competition

Shan will be presenting her work: "Fighting Corruption in Commodity Trading Through Blockchain Technology"

Compared to upstream activities such as extraction, commodity trading sector has always been under the regulators’ radar, though the corruption risks are especially large, mainly due to the existence of enormous number of intermediaries, their opaque structures, manual documentation and the regulatory lacuna. Blockchain, on the other hand, provides a unique opportunity to sanitize the sector, as a decentralized open ledger where transactions are recorded in blocks built upon by everyone in the platforms, and where transactions are self-executed upon fulfillment of predetermined conditions in the smart contracts.
Specifically, blockchain can transparentize the sector in the following four aspects:
Anti-corruption compliance. Smart contracts in Blockchain can be designed to only facilitate transactions when a previous party complies with all anti-corruption requirements. Parties must attest to their compliance by putting things of value at stake, such as a certain percentage of profits or a future contract, otherwise it would lose everything it has staked. An absence of a transaction would also be noticed on the ledger, indicating intentional noncompliance.
Supply chain transparency. Current framework of oversight (such as financial regulations) cannot adequately address corruption in the sector, neither are banks in the best position to detect corruption through due diligence due to various barriers. Blockchain provides an effective data management platform through smart contracts integration, where data are synchronized and shared with all parties in the transactional chain.
Tackle trading-specific corruption schemes. As facilitators and middlemen in a business model typical in the sector called “transit trade”, commodity trading companies (CTCs) administer the delivery chain and build connections with foreign officials. Quite often, bribe payments are hidden via a scheme in which the initial purchases of commodities is done by a small private CTC at a low purchase price, where the commodities will immediately be re-sold to a larger CTC at a higher price. The profits earned by the small CTS then goes into the pockets of its beneficial owners, who are often Politically Exposed Persons (PEPs). Blockchain-based records make it substantially difficult to alter the quantity and quality specifications provided by any CTC on the platform, and would rid of all unnecessary intermediaries acting as middlemen.
Prevent fraud. Forged documents on, say, amount of shipments, can be used by bad actors to defraud banks to obtain more bank loans with the nonexistence supply as collateral. Blockchain only allows commodity trading to continue when all distributed documents on the platform are consistent and verified.

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