Northern Trust, PwC Adds Real-Time Auditing To Blockchain Solution

Northern Trust, a major US custody bank, has developed a solution that would allow audit firms to carry out audits of private equity lifecycle events directly from the blockchain.

Northern Trust launched the first commercial implementation of blockchain technology for private equity in February 2017, which allowed a limited number of clients to manage ownership shares on a transparent distributed ledger technology (DLT) platform.

The latest enhancement allows an audit firm to have its own blockchain node, providing access to relevant fund data to enable real-time audit capabilities. Northern Trust, working with accounting firm PwC and other audit firms in Guernsey, has proved that auditors can now access fund data held on the private equity blockchain to audit specific events.

Pete Cherecwich, president of Corporate & Institutional Services at Northern Trust, said that by expanding their private equity blockchain ecosystem to the audit community, Northern Trust has enabled audit transactions to be recorded on a blockchain in real time.

“This will result in direct efficiencies to both the audit firms and Northern Trust, and provide investors with a more timely and valued assurance product,” said Cherecwich.

Based on the open source Linux Foundation Hyperledger Fabric, the updated version of the blockchain solution gives the audit firms access to a “golden copy,” or immutable master record, of the fund’s data from their own offices. The audit firms can then either transfer the required data into internal applications to complete the audit process or develop new tools to complete the audit directly from the blockchain.

Nick Vermeulen, partner at PwC Channel Islands, said PwC’s ability to directly access distributed ledgers such as the one within the Northern Trust system will allow them to build upon their own blockchain investments.

“Such innovation assists clients as they invest in the opportunities arising from emerging technologies,” said Vermeulen. “This ongoing process will help ensure we are in the best possible shape to adapt in the coming years of change.”

The blockchain solution is so far used by only one private equity firm, Geneva-based Unigestion. Cherecwich they added the new capabilities to attract more users.

“Our strategy was to continue with the one customer and to continue to build out from a minimum viable product to a more robust application,” Cherecwich said. “What we’re doing now is finishing off the complete application, then we’ll start rolling out to our existing clients and new clients to the start of next year, or middle of this year.”

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