03.19.2018
By Rob Daly Editor-at-Large

Northern Trust Adds Audits to PE Blockchain

03.19.2018 By Rob Daly Editor-at-Large

Global custodian Northern Trust has rolled out audits of private equity lifecycle events directly from the blockchain for private equity, which it launched commercially in February 2017.

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 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.

This development 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 that allow them to complete the audit directly from the blockchain itself.

Continuing development of the audit capabilities and the automation of the audit process by PwC will allow audits to be completed in real time as lifecycle events occur. This will help ensure that audits are more streamlined and efficient, increasing transparency of the underlying transactions to the audit firms.

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

“We are excited to be able to leverage the distributed ledger within Northern Trust’s private equity system to innovate our approach to auditing private equity funds,” said Nick Vermeulen, a partner at PwC Channel Islands. “Our ability to directly access distributed ledgers such as the one within the Northern Trust system will allow us to build upon our own blockchain investments. Such innovation assists clients as they invest in the opportunities arising from emerging technologies. This ongoing process will help ensure we are in the best possible shape to adapt in the coming years of change.”

The solution developed by Northern Trust is based on the open-source Linux Foundation Hyperledger Fabric. Northern Trust is also using the IBM Blockchain Platform on the IBM Cloud to develop and run the network with hardware-assisted cryptography and key management to enhance the safety and scalability of these transactions.

Northern Trust invests in cutting-edge technologies and thoughtfully considers collaborations to create exceptional experiences, deliver leading capabilities and provide advanced protection. The company will explore expanding the new solution into other asset classes and jurisdictions based on success with its initial platform.

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