• Easy integration with the existing security infrastructure
• Recent trends in biometric technology
• The shifting identity verification trends with Blockchain technology
• Frictionless KYC-KYB identity verification processes
• Growing remote work culture post-pandemic
• Rising awareness of AML-KYC Compliance worldwide 

From time to time, regulatory developments in AML-KYC Compliance have molded the identity verification trends and the technologies in use. Today, securing a user’s identity is as important as the user-identity verification process itself. Hence, the AML-KYC industry has greeted various hi-tech innovations to create a safer global identity verification market for the financial and regulated sectors.

Let’s discuss how tech advancements dominate the current global identity verification market and the kind of outgrowth which regulated industries look forward to keeping up with the changes to ensure the better safety of their onboarding customers and protection against identity theft.

Easy integration with the existing security infrastructure

The first and foremost is embracing easy and compatible AML-KYC integration with the existing organizational security structure. For example, financial and regulated institutions prefer identity verification tools that quickly integrate within their existing systems, as they don’t want any turbulence in the core technologies which are in operation for years. In addition, advanced integration methods check the compatibility levels during the prototype phase, making the AML-KYC implementation process extremely time and cost-efficient.

Recent trends in biometric technology

Next, recent trends in biometric technology have overcome various longstanding security loopholes. Biometrics identity solutions verify identities through iris and retina scans, fingerprints, palmprints, facial recognition, and facial comparison technologies. With every new standard, a new iteration in the biometrics ID verification is set. As a result, many regulated products and services are now relying on this technology to fight identity theft.

With ID theft and financial fraud among the top AML regulatory concerns, various RegTech giants have conceptualized and introduced innovative prototypes in the digital identity verification market to combat the growing money laundering threats. Thus, Multimodal Biometrics, i.e., two or multi-factor biometrics verifications, is emerging as the most powerful option for businesses from a security standpoint. Furthermore, digital identity is not only the identity stated in one’s id documents; it also entails the individual’s univocal identity, with geolocation, social networking, and biometric features.

The shifting identity verification trends with Blockchain technology

AML-KYC connoisseurs assume Blockchain technology will mark its way in the global identity verification market, 2023-25. If we evaluate the recent identity verification trends from a technical perspective, Blockchain is expected to grow manifold, disrupt the AML industry, and bring information decentralization in the next decade. On the contrary, there is ongoing research to overcome challenges like deepfakes in Machine Learning and Artificial intelligence technologies. Besides, identity verification on Blockchain-based technology is relatively more secure, as this trustless record-sharing method eliminates the middleman channel while authorizing and streamlining the identity process.

Frictionless KYC-KYB identity verification processes

Identity verification is now apparently inevitable in both financial and non-financial industries. For example, any process that requires businesses or individuals to open accounts, pay online, and deal with financial instruments is subject to Know Your Customer (KYC) and Know Your Business (KYB) authentication. Similarly, every industry that deals with the mass user onboarding process must also apply advanced identity verification methods as part of AML Compliance measures.

Though a growing number of individuals and businesses today are looking for a more secure way to verify their identity, contrarily, many people have started perceiving the onboarding or diligence process as an added burden owing to the recent rise in data breaches. Also, biometric, eco-sign or ID proof procedures create additional friction in the user experience. On the face of it, there is a critical need for sleeker technologies to verify user identity without friction or unwanted halts during the onboarding process, as that could make users grow skeptical to the extent that they might decide to withdraw their submissions.

Growing remote work culture post-pandemic

An upward graph in the digital channel adoption post-COVID-19 pandemic has also shown increased cyber threats and safety vulnerabilities. The demand for an all-inclusive digital identity verification market is surging continuously to combat these security threats. New verification methods have responded aggressively to the intensifying cyber terrors and other susceptibilities at organizational levels. The vigorous scope of remote operations has brought forth the bring-your-device (BYOD) trend, which is now driving the identity markets. BYOD trend also has derivatives like bring-your-own-phone (BYOP), bring-your-own–technology (BYOT), and bring-you-own-personal-computer (BYOPC).

Organizations have widely adopted biometric verification methods as their integral security measures as an increasing number of work-front operations are performed remotely post-pandemic. As remote operations are becoming a new normal, hand-in-hand fraudsters are adopting new technologies to trick the victims into the sophisticated email, SMS, and other identity scams. Customers are now more susceptible to phishing, account takeovers, lending fraud, and other identity cons. Hence, organizations must perform proper due diligence checks to detect and combat identity threats in real time and save themselves from financial and reputational loss.

Rising awareness of AML-KYC Compliance worldwide

Identity verification procedures have been in application for years. Still, with emerging regulations, financial and regulated organizations are now more open to implementing advanced Blockchain, Artificial Intelligence, and Machine Learning algorithms to keep up with the AML-KYC regulations.

International laws and regulations, including the U.S. Bank Secrecy Act (BSA), EU Anti Money Laundering Directives (AMLD), and Financial Action Task Force (FATF) Recommendations, have brought evolving standards to the AML-KYC industry. And to maintain these standards, businesses must maintain the AML regulations, and financial institutions must introduce up-to-date technologies to identify individuals and businesses. Also, in the wake of recent data breaches, enterprises have increased their due diligence budget to organize safer and frictionless onboarding of their customers.

IDMerit is a global identity verification market pioneer and offers the best-in-class identity verification solutions to businesses worldwide. Book an IDMerit product demo with our AML-KYC Compliance expert; we help global businesses remain AML regulatory compliant.

The post A Talk on Recent Identity Verification Trends and Technology Advancements appeared first on IDMERIT.

Since the 1900s, a lot of research hours, brainpower, and investment have gone into perfecting the biometric verification system and discovering new ways to use it in the fight against fraud, and identity theft and to simplify everyday processes. Though there are some misconceptions about the use of biometrics, every year brings new advancements and stronger biometric identity verification systems. Installing a biometric identity verification system isn’t as complicated, costly, or intrusive as you may think, but can it be your business’s last line of defense against fraudsters.

What is a Biometric Identity Verification System?

Biometrics is the science of measuring the human body as it relates to unique human characteristics. A biometric identity verification system verifies the identity of individuals by using their biometric characteristics. Biometrics authentication currently uses DNA, ear shape, eyes, fingers, gait, keystrokes, heartbeat, odor, signature, veins, and voice to verify identity. 

Biometrics is used in a variety of applications, such as security, medical diagnosis, and human resources. However, biometrics has long been the subject of controversy. Some argue that the use of a biometric identity verification system violates individual privacy due to mass surveillance. This is to be expected, as there are some downsides to biometric authentication.

As with any new technology, there will be some growing pains. It took centuries for biometric identity verification to be where it is now. And in the last decade, developers have made huge leaps in progress with their biometric identity verification systems. For now, there are still rare instances of false matches, misuse, and implementation woes, but the use of biometrics is still a safer option when it comes to creating the ultimate identity verification solution. 

Biometric identity verification systems are different from traditional identity verification systems, such as passwords and knowledge-based systems, in that they use the unique biological characteristics of an individual to verify their identity. Unlike traditional identity verification systems, which can often be fooled by fraudsters, biometric verification is singular to an individual and are therefore far more effective at confirming their identity. Today, most biometric identity verification systems use fingerprint, facial, and palm print biometrics.

How Do We Use Biometric Identity Verification Systems?

In the past, fingerprints were the most commonly used biometric authentication method. However, in the past few years, biometrics verification methods have become more advanced and safer. Biometric identity verification systems are becoming increasingly common as businesses and government agencies realize the many benefits of using a biometric verification system.

There are two types of biological identifiers:  morphological and biological. For biometric identity verification, we mainly use morphological identifiers which consist of fingerprints, hand shape, finger, vein pattern, the eye (iris and retina), and the face’s shape. Medical and police forensics use more biological identifiers like DNA, blood type, saliva, and urine.

Biometric identity verification systems are now used almost everywhere: –

• Security sign-ins
• Commercial use (user and customer onboarding)
• E-Learning platforms
• Gaming
• Online security
• Travel security and border control
• Voter identification
• Physical access (home, office, smart devices, etc.)

Biometric identity verification systems are fast, easy to use, and accurate, making them a great method for verifying the identity of individuals. Biometric authentication can also be used to verify the identity of individuals when traditional identity verification methods, such as physical tokens and handwriting, are not reliable or acceptable. Biometric identity verification systems are also an excellent way for businesses to increase the security of their operations.

Traditional Identity Verification Solutions

Biometric identity verification is different from traditional identity verification solutions, as it uses what is intrinsically you to verify identity. Traditional identity verification solutions are based on what you have, know, or the existing data. Here are a few common traditional verification methods: –

Knowledge-Based Authentication (KBA):

Ever been asked, “What’s your mother’s maiden name?” That’s how KBA works. It’s based on the premise that only you will know the answer.

Physical Token

That driver’s license, ID card, voter registration card you carry around, or birth certificate in the drawer is the standard way to verify identity.

Password/PIN

Your Personal Identification Number (PIN) should be your most guarded secret according to bank officials who have access to your account regardless. And how many of us rely on password managers to save us?

Two-Factor Authentication (2FA)

Uses a combination of 2 types of identity verification.

Multi-Factor Authentication (MFA)

Uses multiple identity verification methods to verify identity.

Short Message ide (SMS)

Typically, SMS verification is used as part of 2FA or MFA as a backup protocol to verify identity.

Credit Bureau Based Authentication

Similar to database authentication where customer identity is verified by being matched to their credit score or other Personally Identifiable Information (PII).

Traditional identity verification solutions have been used by governments and businesses to verify identity for decades. However, these have been proven to be not 100% effective for identity verification. In the past, these methods were somewhat reliable but were still subject to human error and fraud.

Over the past few decades, new updates and advancements in these traditional identity verification solutions, such as the inclusion of barcodes and biometric features, have increased their reliability. Still, they are subject to fraud and misuse due to human error and unprotected databases. Now, most businesses incorporate some form of traditional identity verification with a biometric verification system, such as fingerprinting, to better improve digital identity management.

Types of Biometric Verification

Biometrics has come a long way in the past few years. Today, various types of biometrics are used in a wide variety of different applications. Biometric identity verification is only one such application that gives us a wide range of uses. According to the Biometrics Institute, there are 16 types of biometrics in use today.

DNA 

Deoxyribonucleic acid (DNA) is present in all human cellular material e.g. hair, blood, skin, etc. Biometric DNA sampling requires contact with the subject. However, in forensic use DNA may become contaminated with other substances.

EAR

The unique shape of the outer ear has become a proven method of biometric identification outside of law enforcement with the advent of advanced computing algorithms such as convolutional neural networks during the last decade.

EYE

Biometric identification of the eye involves the use of the iris, retina, and sclera vein which are the veins in the white part of the eye. The sclera vein and retina are often used to unlock smartphones as part of a multimodal biometric identity verification system.

FACE

The human face has 80 nodal points which can be used to verify identity. Some include the shape of your cheekbones, jawline, the distance between the eyes, and the width of your nose.

FINGER

We all know about fingerprinting and palm prints, but what about finger geometry? Finger geometry measures the width between your fingers, the thickness, and the length.

GAIT

That sexy statement walk you have is unique to you and it is often how people are recognized even when disguised. So as Shakira says, the hips don’t lie.

HAND

Aside from your palm print, your hand can be measured using other unique features such as width, side profile, and thickness.

HEARTBEAT

Apparently, your heart can beat special for someone. However, not as special as you think. Your heartbeat’s electrical signature that is unique to you is what makes it special.

KEYSTROKE

This may give you some doubts about the validity of biometrics. The use of keystrokes to identify someone requires a previously recorded session to match their keystrokes.

ODOR

Now all those werewolf romances make sense. You can identify someone by their unique scent. Only it’s not as romantic when they use machine olfaction devices.

SIGNATURE

The tried and somewhat traditional method of identity verification. Only now it is dynamic signatures captured on digital devices or static signatures matched to online databases.

VEINS

Did you know the veins on your hands form unique patterns that can be used to identify you? Vascular veins are captured by infrared light and recorded on a charge-coupled device camera.

VOICE

Your voiceprint can be combined with other biometric features like the shape of your throat and the length of your vocal cords for speaker recognition. Not to be confused with speech recognition which recognizes what is being said rather than who is speaking.

Biometrics has become an integral part of our lives. From unlocking our smartphones to accessing our homes and cars, we are surrounded by biometrics. As more and more aspects of our lives become automated with the help of biometrics, the demand for biometrics identity verification services continues to grow.

Why Does Your Business Needs A Biometric Identity Verification System?

Firstly, let’s clear up a few major misconceptions about biometric verification systems. One, it isn’t complicated to use. After all, we are already using it in smartphones. Two, it’s not as costly as billion-dollar data breaches. And three, no massive changes to your current systems are needed unless you want to be MI5.

Typically, identity verification requires three ways to verify identity: –

• Something you own
• Something you know
• Something you have

Multimodal biometrics combines several biometric sources to increase security and accuracy. Multimodal biometric systems require two or more biometric credentials for identity verification. Using two or more biometric features almost guarantees a perfect identity match and eliminates the need for knowledge-based authentication and passwords.

In your business, a biometric identity verification system can streamline many organizational processes, and improve data management and overall business security. If you are in the financial sector, health. In private security and in the age-restricted industry, a biometric verification system will be an invaluable asset in every sector of your operations. A biometric identity verification system can help: –

• Improved customer journey
• Better B2B customer onboarding
• Avoid age verification scams
• Safer data security
• Ongoing behavior monitoring of key staff

Traditional identity verification solutions are slowly becoming outdated as cybercriminals, scammers and fraudsters become more advanced. Biometric identity verification systems can give you peace of mind as it protects almost every aspect of your business. As the ultimate identity verification solution, biometric verification makes it easier for businesses to verify anyone, reduce security risks, and protect their business and customers from fraudsters and other cybercriminals.

Biometric Identity Verification Systems from IDMERIT

Most people are already familiar with the idea of fingerprints as a means of identification, but in recent years facial recognition software and other biometrics have become important parts of identity verification. We at IDMERIT have a suite of APIs with built-in multimodal biometric capabilities.

We currently use facial verification along with 12 other behavioral biometrics to verify identity and keep your biometric data secure. Our biometric identity verification systems allow you to verify anyone, anywhere, and at any time without strenuous changes to your current customer onboarding software. Combined with biometrics we use device fingerprinting, geolocation, IP addresses, and live video for stronger real-time identity verification.

Get real-time identity verification during B2B customer onboarding and design the ultimate behavior monitoring system for high-risk customers. Identify even the unbanked and those who try to hide behind their devices and false digital identities. Protect your staff, business premises, and consumer data with ease both online and off.

As the use of biometrics has increased, so too have the clear drawbacks of traditional identity verification methods. This is why we believe in multifactor authentication powered by AI-assisted methods and multimodal biometrics to give you the best options for digital identity security. Unmask fraudsters and get the ultimate identity verification solution for your business.

Talk to one of our reps today!

The post How Biometric Authentication can be the Ultimate Identity Verification Solution? appeared first on IDMERIT.

Difference between Face Verification and Face Recognition

Face recognition and face verification are used almost interchangeably, but they are not the same thing. To understand the differences, one simply has to understand the meanings of recognition and verification. Recognition is all about recognizing the face and verification is about matching an identity to the face.

Maybe the confusion over face recognition and face verification stems from the fact that face recognition has a history and face verification is only a recent term. Because of that history, we know more about face recognition than its descendant face verification. Though face recognition is used to identify and verify a person’s identity, in terms of identity verification solutions, it’s called face verification.

The funny thing about face recognition technology is that a lot of millennials view it as tech created in their era. When in fact, facial recognition research started way back in the 1950s. It was already being used way before the millennials arrived. One thing millennials can take credit for is the various applications for face recognition.

Uses of Face Recognition

As much as many of us admire face recognition as a cute feature on our smart devices, face verification does so much more for digital identity security. However, that doesn’t lessen the risks facial recognition apps put all their users in for entertainment. And with some major corporations refusing to share their data with law enforcement officials, what exactly is your face recognition data being used for?

Global ID Verification

Facial verification systems are installed at airports, borders, and points of entry into countries, states, and regions. As people move through these points of entry and across public spaces, security systems are equipped with facial detection and recognition software ready to identify those who try to evade the system. Due to its cross-border nature, it needs global ID verification capabilities to get the job done.

Real-Time Identity Verification

Law enforcement agencies were one of the first adaptors of face verification and continue to push for its widespread adaptation across the globe in the name of digital identity security. This is why they are always clamoring for access to private corporate facial verification systems to increase match success. Real-time identity verification is a crucial factor for these agencies.

Age Verification

One place face ID verification can be put to good use is on online gaming and gambling platforms. Facial verification systems can protect minors while being a deterrent to bad actors who have a tendency to infiltrate these sites. Age verification will keep minors out of age-restricted sites and reduce the impact of scammers who love to pretend to be kids.

KYC Verification and AML Compliance

Next to global security, automated KYC verification is the best use of face verification. As part of your user or customer onboarding strategy, face verification can be part of your permanent digital identity security system. In banking or other high-risk industries with assets to protect, global ID verification will give your face verification system an added edge in terms of asset protection and transaction monitoring. You can choose to implement your own face verification system (a bad idea) or outsource from a face verification service.

Mobile Face Verification

Do you want to find out who is related to you or not? There’s a face app for that. It’s one of many face recognition apps that perform different functions depending on the algorithm. For instance, popular face recognition apps like AppLock which allows users to unlock their smart device, and FaceAPP which allows them to change their identity can be utilized for mobile face verification.

What your face verification system is capable of will be based on the type of algorithm that guides it. How the data is used will be based on the people controlling the face verification system. And many of the benefits or problems with face verification will be based on the algorithm and the people that control the system.

Benefits of Face Verification

Face verification is rooted in artificial intelligence, the Internet of Things (IoT), and machine learning and when used correctly there are a lot of good things that can come from that. In the last few years, there has been a push into the blockchain which has the potential to redefine face verification and digital identity security. Even without the addition of blockchain, there are still a lot of benefits of using face verification.

• Safer online
• Improved security systems for law enforcement
• Better picture quality with camera autofocus
• Smoother user and customer onboarding
• Age verification
• Automated KYC
• Improved digital identity management

Overall, the convenience of not remembering passwords or looking for keys

In fact, many of the uses of face recognition and the benefits we reap with face verification. The convenience of not having to memorize passwords and the connectivity of global ID verification makes a huge difference in our personal data security and how we do business. Real-time identity verification gives us the ability to validate the ID in real-time and save lives that could have been lost to human trafficking and protect the vulnerable in our society.

Though we love those facial recognition apps that allow us to unlock phones, make silly faces, and play games, improved digital identity management is supposed to be one of the major benefits of face verification. However, unsecured face recognition applications have made digital identity security a challenge. And knowing cybercriminals, it won’t be long until your child’s biometric features can be aged to open his adult accounts.

The Trouble with Facial Verification Systems

Of course, once you are dealing with ever-changing technology, there are going to be a few hiccups along the way. Ironically, what held back the development of face verification was technology, public fear, and proper databases for comprehensive global ID verification. Even with everything in place, face verification can be your best bet for digital identity security or your worst.

Because after all, the human factor is still involved, and with it comes a bit of trouble. One particular irony of face verification is that it can actually end up not matching faces! And while we can expect some technical issues, sadly having the technology used for ill, is something all developers and users must be wary of.

Mismatches and Poor Match Rates

As mentioned before, 100% perfection isn’t expected, but 58% means a child had better chances of identifying that person than that algorithm did. The harsh reality of the facial verifications systems industry is that miss-matches and low match rates do exist. Glitches, settings issues, database access, and compatible software and hardware makes acquiring higher match rates more difficult.

Digital Identity Management

To acquire high match rates, you need access to a database that is credible and has validated images of the individual like the U.S. Department of State. And that is the problem with most facial verification services. No credible database and no access to one. Then there is the added nightmare of improper security around the faceprint data that can lead to leaks, stalking, and identity theft.

Altered or Tampered Images

As the technology evolves there is becoming less and less of an issue with altered or tampered images. However, as technology evolves, altered images are getting more sophisticated over time. Not only that, but masks also as we have been wearing for the last two years, can complicate matters when attempting to match a complete image. Computer Generated Imagery (CGI) allows face recognition app users to alter their faces and that is why most of the data generated on these apps are practically useless, but not harmless.

Bias and Privacy Concerns

There is a lot of concern around the management of faceprint data and rightly so. Even government security agencies can’t guarantee absolute protection. Tech giants like Google and Apple go to extreme lengths to protect personal data even from potential governmental interference. And they may be right in their approach as government agencies have been found in putting their human biases into the system leading to racial profiling and increased miss-matches.

Marketing Data Collection

Research and data are necessary for continued success in marketing. How that data is collected and used is another matter altogether. Imagine walking past a TV and based on the recognition software, you are now bombarded with ads that match your assumed age, race, and gender. That is how far marketing data collection has become and though it benefits marketers and businesses, customers are not fully on board with using their facial images to sell them goods and services.

Face Verification as Part of Your Identity Verification Solution

Despite the fears over privacy, bias, deep fakes, and racial profiling, face verification is already a part of our everyday existence in cameras, smart devices, machine-readable passports, and other forms of face ID. So, embracing face ID verification is not the real issue, using it correctly is. In fact, many of the problems with face ID verification stemmed from its users and applications.

A face verification system is supposed to have a match rate of a minimum of 91%. Anything with an error rate above 9% needs to be re-tested and should not be considered an identity verification solution. Pay attention to the level of human involvement in guiding the application. Too many increases the risk of biases and mismatches.

That’s why our face verification APIs have limited human interaction with no racial demographic segmenting to reduce bias. Control and access to large credible global databases increase our match rates to 95%.

IDMscan is not just about face verification. IDMscan validates documents and when paired with IDMdevice and IDMaml, it is a complete identity verification solution for customer onboarding and AML compliance. Providing real-time identity verification, device fingerprinting, and watchlist screening to identify potential bad actors.

Biometric identification is the future of digital identity security. And though using the last thing that is uniquely yours to safeguard your personal and business data, seems like taking an unnecessary risk, done correctly it can be the highest form of protection you’ll have to date. All it takes is reaching out to an expert at IDMERIT to learn how we can develop a secure face verification system for your business.

Let Us Prove It! Contact us, today!

The post The Importance of Face Verification for Digital Identity Security appeared first on IDMERIT.

To be on the safe side, you shouldn’t take such chances during bank customer onboarding or with your own company. Completing a UBO declaration form is a minor step in transparency for your company, but a giant leap for Anti-money Laundering (AML) and combating the financing of terrorism (CFT).

Who is an Ultimate Beneficial Owner?

Under the European Union’s (EU) 4th Anti-Money Laundering Directive (4AMLD) along with making increased provisions for identity verification, strict guidelines were set in place for Ultimate Beneficial Owner disclosure. For financial institutions and Business-to-Business (B2B) operations, recognizing the ultimate beneficial owner is a standard part of Know Your Business (KYB) verification and AML compliance risk assessment. An ultimate beneficial owner is anyone that has by 10 to 25% capital ownership and/or voting rights in a company (depending on where you live) under SWIFT guidelines.

The ultimate beneficial owner is the person that ultimately benefits from any business transactions. During new bank or B2B customer onboarding, businesses need to complete a UBO declaration. In the chance that they provide a faulty or incomplete declaration, steps are taken during KYB verification to identify the ultimate beneficial owner.

Document verification of all acquired business credentials including UBO declaration:

• Researching the ownership chain
• Identify and verify the UBO’s
• Perform comprehensive AML risk assessment

These four steps may look simple, but in reality, these four steps can take months to complete! And if your business doesn’t perform accurate document verification, all the other steps will be in vain. Months wasted, money wasted and still, you can end up onboarding a fraudulent business with a fake Ultimate Beneficial Owner.

Though a UBO declaration is a legally binding document, it is still not enough to deter fraudsters, money launderers, sanctions, and tax evaders. Add in the fact that often UBO declarations are either filled with dated data or reported late to regulators, the effectiveness of a UBO declaration is somewhat tame. And this is why completing a comprehensive UBO/AML check is your business’s only hope for AML compliance.

What to Look For When Screening an Ultimate Beneficial Owner?

Before the completion of a UBO declaration, real-time identity verification of the person submitting the documents needs to occur. Then along with their personal documents and credentials, the business documents need to be verified as well. Researching the ownership chain is when things can get a bit messy and/or reveal questionable links.

And that’s why during researching the ownership chain you need to identify all owners both past and present to establish whether the business has passed through some questionable hands and if the current owner(s) actually have legal ownership. Aside from share capital and voting rights, UBOs can be:-

• Beneficiaries of at least 25% of an entity’s capital
• Anyone with the power of attorney for the company and asset holders
• Guardians of minors and beneficiaries who are minors
• Under 4AMLD, even upper management need to be screened
• Corporate directors or nominee directors are appointed to conceal the true owners of a given firm
• Shareholders, including the holders of bearer shares that can be transferred anonymously

And this is one reason why a UBO declaration may not be enough. In long-established organizations, current directors or even shareholders may not be fully aware of who truly controls what. This is why checking all avenues of potential ownership while researching the ownership chain is necessary.

• Avenues of Potential Ownership
• Direct and indirect ownership
• Ultimate owner – actual and perceived, independent of the company
• Corporate group – all companies with the same ultimate beneficial ownership as the subject company
• Subsidiaries and sister companies
• Corporate organization structure
• Beneficial ownership vs. perceived ownership
• Ownership assessments conducted from the top-down or bottom-up approaches
• Corporate ownership structure (LLB, INC, Partnerships, etc.)
• Shareholders and investors
• Varying definitions of ownership such as creative licenses and patents

Under the EU’s Fifth Anti-Money Laundering Directive (5AMLD) and the oversight of the Financial Action Task Force (FATF), further considerations were made for publicly available company Ultimate Beneficial Owner lists and national registers. International co-operation between banks, regulators, and businesses would be established to support identity verification of UBOs including those of trusts. And private bank UBO registers that are accessible to the relevant authorities.

Why is Global ID Verification of UBOs Important to AML/CFT?

According to the FATF, which has the scope to ensure obligations concerning UBO declaration, identification and reporting are met, UBO’s identity verification is important for transparency of ownership. Which is vital to AML compliance certification and combating the financing of terrorism. Due to the complexities and widespread growth of some ownership structures, global ID verification becomes a crucial part of UBO onboarding, accurate KYB verification, and up-to-date company-based UBO registries and centralized UBO registries.

Without accurate global ID verification, none of the data in any of these registries would be valuable. B2B customer onboarding is a waste of time and digital identity security would be threatened when existing databases get corrupted. Therefore, international cooperation and access to business and centralized UBO registries are a must.

Professional services like lawyers and accountants are responsible for their own UBO registers and enjoy higher-tiered access to centralized UBO registries. But, in many cases, that access and existing information is limited to their jurisdiction and clientele. Plus, digital identity security isn’t something they signed up for and many are concerned about data protection and access.

As much as the FATF and Financial Intelligence Units (FIU) around the world are doing their part for enforcement through fines and sanctions, global ID verification is still a challenge for banks, finance, and legal professionals. Perceived ownership, bearer shareholders, and nominee directors can make Ultimate Beneficial Owner verification complicated. Especially, when these hidden actors give their stand-ins all the rights and responsibilities of ownership while still collecting their benefits.

The Risks and Challenges of Real-Time Identity Verification of Ultimate Beneficial Owner

Let’s start with the fact that not all the information concerning UBOs is available to public registries. Because the FATF does not call for public beneficial ownership registries for legal entities or trusts. Neither are banks and select financial bodies required outside of the regulators to provide information on their clients. Though everyone is encouraged to share in the spirit of international cooperation, in reality, access is somewhat limited. And that is the number one challenge.

Limited data and access

For B2B customer onboarding this makes real-time identity verification almost impossible as data needs to be sourced for accurate identity and document verification. Bank customer onboarding fares are no better as their document verification services usually involve human verification of physical documents and/or put too much trust in the legal power of the UBO declaration. That results in…

1. Long B2B customer onboarding process

Part of the KYB verification requires an assessment of risk for the UBOs for AML compliance. Now, after a long wait for data that may be outdated, all the information previously submitted may be useless. To top it off, the risk assessment itself may not check all the necessary watch or sanction lists. So now you have an…

2. Inaccurate risk assessment with outdated data

Therefore, in completing UBO verification, timeliness matters. It matters to digital identity management, B2B customer onboarding, and AML screening. Real-time identity verification with global access should be possible at every stage of the UBO verification process. And in your risk assessment should check for:

• Politically Exposed Person(s) (PEP) and Office of Foreign Asset Control (OFAC) sanction lists
• United Nations, UK, EU, and Australian (DFAT) Sanction lists
• Specially Designated National (SDN)
• Inspection lists
• Local Government, Federal and International Law Enforcement Databases
• Spam lists
• Adverse Media Watchlist
• Deep web

Further action on your part will be based on their perceived level of risk. Low risk can proceed as normal, but medium needs further investigation while high-risk clients should have continuous monitoring and screening to mitigate risk. Remember, though high-risk clients may be eventually fined or criminally charged if breaches are found, so will you if you fail to report in a timely and efficient manner.

KYB Verification Process to Determine Ultimate Beneficial Owner

The Financial Crime Enforcement Network (FinCEN) Customer Due Diligence (CDD) rule which amends the Bank Secrecy Act (BSA), is meant to identify and verify the identity of the beneficial owners of companies opening accounts. Part of a CDD compliant KYB verification process is having automated monitoring systems, document verification, examiners, and regulatory reports. Ensuring continued protection and success in your CDD program relies on international cooperation and database access.

Though FinCEN and the FATF will only require the completion of CDD and regulatory reports. When it comes to KYB/AML compliance, your company can end up facing fines due to following minimal compliance guidelines and improper risk assessments. Therefore, half measures should never be an option. Especially where B2B and bank customer onboarding are concerned. For your KYB verification process to achieve true AML compliance you need: –

• Global identity verification with real-time identity verification
• Automated and frictionless B2B customer onboarding process
• Ongoing transaction and behavior monitoring
• The secure internal and external communication system
• PEP and sanction list screening
• Adverse media watchlist screening
• Access to all the relevant watchlists and UBO registries
• Automated and mobile compatible systems and methods
• Expert staff training and oversight
• Document verification services
• Digital identity security system and management
• Timely regulatory reporting

As long as this list may seem, it does not cover instances where you have to make risk-based decisions such as extending credit or lowering the UBO threshold for specific clients. The best thing for your business is to keep the lines of communication open between the regulators and examiners to ensure you are making the right decision concerning the ultimate beneficial owner.

Five Ways IDMERIT Keeps UBOs In Check

Clearly, a UBO declaration is not enough for valid identity verification of ultimate beneficial owners. Nor will it offer any long-term protection against fraud, money laundering, terrorism financing, sanction evasion, or corruption. Coupled with long onboarding processes with outdated data that provides inaccurate reports, it is no wonder companies are having a hard time with UBO verification.

We can ease the burden and confusion of Ultimate Beneficial Owner checks and KYB verification in five ways:-

1. Start with Global ID Verification

This isn’t the 90’s. If you can’t verify identity across the globe through multiple devices, why even offer identity verification services? As we have seen in the news with Russian sanction evaders, many have businesses and/or residences in other countries. You need identity verification services that work with a modern global era.

2. Document Verification Services

How do you properly validate ID? Through our document verification services. Using our identity verification API, IDMscan can give you global ID verification in real-time using biometric data and by scanning passports, drivers’ licenses, etc to validate ID.

3. In-Depth Risk Assessment

We’ll check emails, domains, and IP addresses to give you a clearer and more comprehensive risk assessment. Use IDMtrust to identify high-risk clients easier with ongoing behavior monitoring to ensure up-to-date and accurate risk scoring.

4. Digital Identity Security and Management

Managing and protecting your own database comes at a cost. Not to mention it doesn’t provide access to all the necessary watchlists for proper risk screening. Instead of worrying over access and security, use IDMaml which provides all the access you need to the necessary global watchlist to meet AML compliance.

5. Automated Real-Time Identity Verification for UBO’s

B2B customer onboarding and Ultimate Beneficial Owner verification do not have to be months in the making. You can have real-time identity verification as part of your KYB verification process that meets the CDD requirements with IDMkyb. The best benefit of this is no more fines for outdated and late reports.

Using these five services provided by IDMERIT you are already beyond the minimal requirements for the FATF and FinCEN. But if you are truly serious about document verification services and want comprehensive digital identity security, talk with one of our CSRs today and we’ll help you keep all sanctions evading UBOs in check.

The post Ultimate Beneficial Owner: Everything You Need to Know appeared first on IDMERIT.

1. How to Make Automated KYC Part of Your Cybersecurity Policy
2. Ways in which automated KYC can pair with your cybersecurity policy
3. How Including KYC measures in Verification Process can help?
4. Automated KYC = cybersecurity
5. How Idmerit can help?

Cyber threats have become part of everyday life for individuals, governments and organizations. Traditionally, cybersecurity was limited to antiviruses and firewalls. In recent years, we’ve witnessed the advent of cloud protection, ransomware and malware protection and even identity protection to keep you anonymous online. As cybersecurity increased, so did cyber threats. With the cyber threats outpacing protection, it has become clear that cybersecurity could no longer be limited to firewalls and antiviruses.

Knowledge-Based Authentication (KBA) reached its limits in the finance industry. Internet usage meant more personal information was available online, and cybercriminals now had easy access to KBA answers. The pandemic made matters exceedingly complicated when millions of businesses started or moved online. Now individuals weren’t the only victims. Entire corporations and small businesses were under attack from cyber threats. However, cybercriminals weren’t the only problem. When financial transactions went digital, so did money laundering. And when it was discovered that a bank in Germany was involved in the Panama Papers Scandal, anti-money laundering policies were overhauled for a more global approach. Know Your Customer (KYC) and Know Your Business (KYC) became the staple requirement for customer onboarding in financial institutions.

How to Make Automated KYC Part of Your Cybersecurity Policy

Combining KYC with cybersecurity was not initially the goal when the finance industry and government agencies took action against money laundering. For banks and other financial institutions, the KYC verification process ensured that customers cleared all the essential customer due to diligence security checks during customer onboarding.

But in PwC’s 2020 Global Economic Crime and Fraud Survey, findings showed the number one and two types of fraud in most industries were customer fraud and cybersecurity, respectively. This survey indicates that the KYC verification process failed somewhere during customer onboarding. Despite companies beginning to invest in more robust cybersecurity measures, the onboarding process remained virtually, pun intended, untouched. Companies were treating threats as one-off instances and only treating significant threats rather than a proactive approach to all potential leaks.

New KYC verification solutions must be implemented across the board for industries at risk, such as healthcare e-commerce. Basic customer due diligence needs to broaden its scope to include industry employees and customers of businesses. Customers and employees are the primary sources of risk, whether voluntarily or involuntarily. Implementing security measures at key touchpoints in the onboarding process can significantly improve your KYC verification process.

By pairing cybersecurity with automated KYC systems, you protect your system, employees, customers and all stakeholders from potential bad actors within the system. Customers are vital to the survival of your business, and their security should always be a priority, but customers also don’t want lengthy ID validation processes. Sadly, the result of protecting customer relations is ignoring Know Your Customer’s Customer (KYCC) when dealing with business entities.

Enhanced due diligence was implemented to restructure the finance industry identity verification system and improve KYC verification solutions. It included AML/KYC verification that went in-depth for ID validation but lacked a comprehensive e-KYC policy. This incomplete policy was due to enhanced due diligence targeting only at-risk customers while still ignoring employees and KYCC.

Due diligence should not be restricted to just customers but should apply to all entities that access your system. Spending millions on cybersecurity and KYC won’t reduce cyber threats if your KYC verification process demotivates customers, ignores KYB and KYCC, and settles for basic ID card verification. Cybersecurity investments should involve faster and seamless automated KYC integrated with AML compliance and cybersecurity checks.

Here are a couple of ways automated KYC can pair with your cybersecurity policy:

Increase Cybersecurity and KYC Knowledge and Awareness

In PwC’s 2020 Global Economic Crime and Fraud Survey, lack of knowledge and awareness of the sources of fraud was the main perpetrators behind individuals, businesses, and industries taking the wrong approach with cybersecurity. Statistical and other research sites showed a common thread of mismatched assumptions and poor cybersecurity execution. Lack of up-to-date available data was not the problem as government agencies and research institutions constantly monitored the cybersecurity threat indexes. The problem was that businesses preferred to leave cybersecurity to in-house IT teams who 37% of the time, according to the PwC Survey, are the perpetrators themselves. Failed employee onboarding practices could increase that number, and when 34% of that number are in managerial positions, your entire IT team could end up working against you.

Banks made great strides in this direction when they campaigned for PIN protection. Still, customers interpreted it as credit cards being vulnerable, whereas, in reality, their personally identifiable information was at risk. Create an education campaign to enlighten the customer on why you need to validate IDs, what will happen in the KYC verification process, and how this identity verification system is protected against internal and external threats.

Businesses should use available industry data and go deeper into employee and supply chain risks by asking more prudent questions during the onboarding process. Consulting with outside security experts on building, onboarding, and monitoring their in-house cybersecurity teams would create an added layer of protection.

Improve Data and Documentation Management

Phishing using Business Email Compromise (BEC), ransomware, and false documentation has surged during the pandemic. CEOs and other key decision-makers were the major targets of these attacks. Though the pandemic has created opportunities for cybercriminals to thrive, part of the blame can rest on business owners and managers. Many businesses did not think digital transformation would necessitate added digital security measures or e-KYC education for staff.

Businesses assumed the pandemic wouldn’t last long. They also did not see these systems as a necessary expense or financially viable investment. Old habits of minimum due diligence coupled with blind trust and lackluster document screening allowed CEOs, CFOs, and other key signatories to be blackmailed and conned out of 42 billion dollars in the US alone.

Businesses are tasked with building the adaptability to react prudently when under cyberattack, create a strong defense against future cyber threats yet develop an automated KYC process that can assess employee, suppliers, and customer onboarding risks. In tackling all those strategic areas and securing the data and documentation associated with the onboarding process, businesses, banks, and even large corporations tend to lose control of one or two of these areas.

Documentation and data security generally suffer as the process is either archaic technology or by hand. Introducing artificial intelligence (AI) and machine learning technology allows businesses the flexibility of quick access and updates with the security risk assessment and identity verification API to analyze documentation in real-time. AI and machine learning give your KYC verification software the ability to problem solve, adjust and automate customer onboarding.

Invest in Biometrics Screening for Mobile ID Verification

Increases in mobile users seem to have slipped unnoticed by some industries. Mobile ID verification is almost unheard of outside the finance industry and usually entails only verifying your phone number. The actual use of smart devices as part of any identity verification system is practically non-existent. Cellphones and other smart devices come with many security features that make stealing them not worth the jail time. Attacks to a cell phone can only happen as with any other secure digital device, with the owners’ permission. This invitation to attack is often done by opening random emails, visiting shady sites, or unwittingly providing personal information. With such a huge gap, it is no surprise hackers choose to attack mobile services providers or weak mobile developers.

Companies like Verizon and Apple believe that they are too large to experience a breach. But since we know and Apple and statistics have proven that breaches can come from internal sources, businesses ought to defend against mobile access and KYC verification process loopholes. Android phones have built-in security keys to protect the owner’s information and device. Most smart devices have biometric scans for fingerprint, facial characteristics, and voice for mobile ID verification. Companies use biometrics for restricted area access. Interlacing biometric restricted area access protocols into AML/KYC verification for corporate mobile users can save CEOs billions from cybersecurity attacks.

Database Cross-Referencing 

Social media platforms collect vast amounts of demographic and behavioral data on their users. Any online database can be used to fact-check a customer’s identity and documentation. By adding this step as part of your company’s automated KYC process, your company will be decreasing the opportunities for fraud and cleaning up your onboarding process.

Behavior Monitoring in KYC Staff Training 

Years ago, the role of KYC professionals was not clearly defined and constantly changed. From being entry-level and making simple data inputs and physical checks to risk assessment and evaluator to the key decision-maker. KYC staff was unclear on their next evolution and how their role impacted its cybersecurity mandate.

In the beginning, KYC staff were required only to identify customers who were at risk during onboarding. Even the most stringent HR policies did not consider employee onboarding, supply chain, or support services onboarding. Several years, a few scandals, and 42 billion dollars later, it is apparent KYC staff training would need to hit next-level status and have a massive technological backup to achieve some semblance of onboarding success. KYC staff cannot be asked to identify fraudsters without the relevant cybersecurity training or technical support. Every year your KYC staff doesn’t get efficient KYC verification process retraining. They are being outclassed and outmaneuvered by evolving cyber threats. You create an internal problem that you don’t screen and monitor your KYC team every year.

Training KYC staff and verification system updates cannot be a budget opt-out in challenging economic times. As we’ve seen in the pandemic, it is in these tenuous moments that cybercriminals are most active. And it is in this high-risk era that you should reach out for expert consultation on automated customer onboarding best practices, behavior monitoring, and KYC verification software.

Keep an Eye on B2B Operations

Know Your Business (KYB) is as vital as KYC, and Know Your Customer’s Customer (KYCC) is equally important when dealing with small to medium enterprises. When engaging with established corporations, businesses and banks, assume everyone is doing their part for AML/KYC verification. For businesses, your onboarding process should be stricter than onboarding a customer. Whereas a customer will always be a single entity, companies can evolve into their entity or multiple entities held in trust by a single person or corporation. A business’s weak onboarding process can affect bank signatory access, and their cybersecurity issues can immediately become yours.

How Including KYC measures in Verification Process can help?

Include KYCC measures in your KYB verification process by reviewing their data protection, cybersecurity practices, and onboarding process. Learn more about critical decision-makers, silent partners, suppliers, and investors. Remind your new B2B client of the risks of non-AML compliance on both ends and educate them on new cybersecurity threats as part of ongoing customer relations. Help your new B2B customer protect their investment through KYCC policies while building a lasting partnership against bad actors.

Automated KYC = Cybersecurity

When one speaks about cybersecurity products or protection, KYC isn’t what comes to mind. Reactive measures like firewall protection and antiviruses are what one thinks of when discussing cybersecurity. Nevertheless, automated KYC has proven to be a proactive means of tackling cyber threats.

As with all processes, for automated KYC verification to be successful, strict implementation enhanced due diligence and data management are needed. KYB and KYCC can’t be on the back burner of any KYC verification solutions. Neither should corporate leaders use mobile ID verification solutions or other technological advancements. KYC staff training should be treated with the same importance as B2B customer onboarding and include the supply and distribution chain.

There is a lot of work to include automated KYC as part of customer onboarding best practices. Companies need solid identity verification systems, and many need to update outdated hardware. The pandemic has shifted the security paradigm, increasing cyber threats while decreasing economic activity in some industries. Customers need data protection and education on the KYC verification process. And through it all, your KYC team will need to be on top of the latest trends and threats.

How Idmerit can help?

For even large established corporations, that is a daunting task. Corporations have tried in-house KYC verification solutions but lacked the human resources, interest, budget, or infrastructure to upkeep the process. Even the banks on their own cannot handle all the KYC requirements without outside assistance. IDMERIT’s IDMkyX platform of services gets your business AML compliant using automated KYC practices.

The post Optimize Cybersecurity with the Pearls of KYC appeared first on IDMERIT.

What it seems you’re doing is wasting time, money and creating a whole lot of unnecessary risk for your business. There is no need to fear or complicate the customer onboarding process. All you need is the right ID validation system or identity verification solution and you’re halfway there. But why aren’t you automated yet and onboarding customers? Here are three reasons why you may be avoiding the customer onboarding process.

Customer Onboarding: Budget Limitations

Even if you went the traditional route and did customer onboarding manually, that takes time and can cost you customers and money if the process takes too long. Some companies can’t see the dollar value of customer retention even though it costs less in advertising, paid search and retargeting than a new acquisition. For this reason, some companies forgo customer onboarding.

Customer Onboarding: Not Viewed as a Priority 

When you’re running a tight ship or your company is relatively new, you may not be aware that you should be onboarding your customers. In fact, according to Forbes, even some 18% of well-established companies don’t budget for customer onboarding.

Customer Onboarding: No Prior Knowledge

There are companies out there that still believe customer onboarding is just a matter of sending out a welcome email. There is no focus on following up, building loyalty, or even explaining what they do. And although 76% of companies know the importance of Customer Lifetime Value (CLV), only 42% can accurately measure it and thereby know how to make it effective.  

Customer Onboarding: Five Risks of Inefficiency

First of all, let’s fix the knowledge gap with a quick summary of how customer onboarding works and why you need it.  

Customer onboarding involves helping your customer understand how to use your service, company and product offerings while fostering customer relationships and building loyalty. You can do this via different software applications such as emails, Customer Relationship Management (CRM) systems or through IDMERIT’s suite of identity verification solutions which were developed to make customer onboarding easier. 

When you don’t pay attention to your customer onboarding process or don’t even have one, your company is susceptible to compliance and regulatory fines, fraudulent behavior, and potential breaches. Listed below are the top five risks you face when not having a proper onboarding process for your business.

Losing Money 

Yeah, those unhappy customers aren’t going to complain. In fact, only 62% in the US reported that they didn’t return after a bad customer experience, 91% are just going to leave and probably bad mouth you with other prospects so you might want to reconsider fixing the inefficiencies in your customer onboarding process. Efficient customer onboarding can increase customer retention and acquisition rates. 

A 5% increase in customer retention can potentially increase profits between 25% to 95%, depending on how well you can implement your customer onboarding strategy. Existing customers are 50% more likely to try a new product than new customers. The dollar value of seeking new customers heavily outweighs the risk of removing the inefficiencies in the customer onboarding process.

Wasting Time

When your customer is frustrated by a lengthy processor isn’t even aware of what’s happening or what your product is about then essentially what you’re doing is wasting everybody’s time. (And that leads to losing money too by the way) This is no longer customer onboarding, it’s a hostage situation and both of you are now trapped. Your company is trapped constantly seeking new customers and those customers are probably trapped somewhere in the customer onboarding nightmare you created. Free yourself and your customers by letting us create an identity verification solution that will streamline ID card verification using IDMscan for a faster customer onboarding process.

Age Verification Scams and Identity Fraud

Without a proper ID validation system that can do proper ID card verification, you may end up susceptible to an age verification scam, identity fraud or if you’re in the banking industry, bank fraud. Identity theft losses rose to $56 billion USD in 2020 with $43 billion just from identity scams. Protecting your business from identity scams and fraud is not an option. Opting out of having an automated, secure, ID validation system is not wise. Reduce the risk of scams, keep the kids safe online and protect your business from fraud and scammers by using IDMscan integrated with biometric facial recognition, and team up with IDMrisk and IDMaml as an ID validation system that can scan government-issued IDs in seconds. These products speed up the ID validation process and reduce unnecessary bureaucratic forms. 

KYC and AML Non-Compliance

Since you probably messed up basic customer due diligence, it may be safe to say you may not be KYC and AML compliant. Being Know Your Customer (KYC) and Know Your Business (KYB) compliant means you have proper identity verification solutions or id validation systems in place to perform ID card verification.  Having KYC and KYB compliance is part of being Anti-Money Laundering (AML) compliant and mitigates age verification scams and identity fraud.

When none of these things are in place, you are not only susceptible to security risks, fraud, inefficient onboarding process but you also run the risk of AML non-compliance, Office of Foreign Assets Control (OFAC) non-compliance and hefty fines causing you to lose more money than the cost of simply setting up the ID validation system and developing an efficient customer onboarding process. If you doubt the risks, call and set up a meeting with IDMERIT and let us show you the facts on non-compliance and how you can get AML compliant with IDMaml.

Losing Customers

“Your mission statement may be on the wall, but your core values are displayed in the attitudes of your employees.” – Elle Clarke (CEO, Thrive Global) In an inefficient customer onboarding process, there is usually miscommunication and lack of training among staff. Part of the customer onboarding process is to ensure your team knows how and when to assist the customer. Lack of proper customer service training, product knowledge, post-sale support and technical know-how about the onboarding process, causes customers to lose trust in your brand and turn away. Not only that, 55% of them will return the product if they are not taught how to use it properly, costing you money and wasting their time. Save time and avoid the customer onboarding risks by reaching out to us and let us prove how IDMERIT can make the customer onboarding process seamless for you and your customer. 

Reducing Customer Onboarding Process Risks

To reduce those customer onboarding risks, there are a few features your customer onboarding process should have to ensure a smooth and successful onboarding process.

Clear Customer and Business Goals

Align your customer goals with your business goals and communicate clearly to ensure both of you want the same outcome and involvement. Paying attention to the level a customer wants to be involved in the custom onboarding process can help determine where to shorten the process or reduce or increase details. Show the value of the process, create customer success milestones and celebrate each step of the customer journey. This will help personalize the experience and generate excitement in your product offering.

No Unnecessary Information

The customer journey must be a delicate balance of holding their hand, but not treating them as if they are lacking brain cells to walk upright.  So, it is not necessary to spell out every little detail. Reduce the need to info dump and turn away fewer customers by treating them like the highly functioning adults they are. Provide accessible guides via tap targets and video tutorials that they can opt to read or listen to if necessary. Speed up ID validation by automation using a trusted identity verification service. After all, they were smart enough to choose you, right?

Clear Insights into the Customer’s Journey

The whole point of the customer onboarding process is for you to help your new customer understand your product/service and get acquainted with your customer. It benefits no one and its poor customer service leaves them on their customer journey alone. When you monitor them at each stage of the customer onboarding process, you will be better able to step in and direct them or answer any questions they may have. 

Mobile-Friendly Customer Onboarding Application

Having an automated system is great for you, but what about your customer? Can they access what they need on any device? Creating a mobile-friendly app for your company can help speed up the customer onboarding process by integrating it with mobile identity verification software. Being mobile-friendly also means having multiple onboarding options like self-onboarding or live online onboarding. Plus everyone knows mobile apps are the way of the future. Most Gen-Z’s and Millennials won’t adapt to a brand if they are not mobile-friendly. Using IDMERIT’s mobile identity verification software with IDMautofill makes filling out forms via mobile easier and helps your company adapt to mobile trends.

Simplify the Customer Onboarding Process

Please don’t have your new customer jump through hoops or run through a maze to understand what’s happening. Not only will you risk confusing them by creating bottlenecks and silos, but you also risk losing them, especially if you are still attempting to perform customer onboarding manually in this digital age. (Please stop!) Make the process interactive, clear up redundant requests for information, make sure your team is trained and has ready responses and follow the KISS model by keeping it simple, accurate. The simplest thing you can do is get a fully automated customer identity validation system and use mobile identity verification software from IDMERIT.

Make the Customer Onboarding Process Fun

Having someone read through a 60-page guide isn’t very appealing, and as mentioned before wastes time and can end up providing a lot of unnecessary information. 90% of people think businesses can do better with their customer onboarding process. So do better! Make the process fun. Encourage referrals with challenges and use gamification to help them meet milestones and reward them with prizes. Provide welcome packages or swag bags and use fun informative videos they can interact with. Once you make your customers love starting and finishing the journey with you by helping them understand the value of your company and the functionality of your product, you’ve done customer onboarding right.

Closing

Once you’ve created a customer onboarding system that is KYC and AML compliant with an ID validation system and mobile identity verification software to perform ID validation, you can measure your customer onboarding metrics. Pay attention to click rates, open rates, attendance and watch rates for demos and webinars. Measure all your pirate metrics, not just revenue, check activation, retention and referral, in particular, to see how your customer onboarding strategy is working for you.

Did you get all that? If not, don’t worry about it, you should just contact IDMERIT and take the guesswork out of customer onboarding metrics. Let us help you create an efficient onboarding process using IDMdevice to protect you from identity fraud and age verification scams, IDMaml and IDMkyc to keep you KYC and AML compliant and integrated with IDMscan for faster id card verification. 

Let us prove how you can have an efficient, mobile-friendly customer onboarding process without the risk through our identity verification solutions. Talk to us today!

The post Are inefficiencies in your customer onboarding process costing you more than potential clients? What are all of the risks? appeared first on IDMERIT.

Customer onboarding is important for both your business and your customer. It must not be confused with user onboarding which is done mainly for employees and whose focus is solely on getting the user to know how to use your product or service.  Customer onboarding’s focus is on getting your customer to buy and ensure repeat business.

Benefits of Customer Onboarding

Increased Customer Loyalty

In an effective onboarding process, the customer’s problem is solved quickly and efficiently. Leading to a better understanding of your product or service which according to Harvard Business Review leads to increased customer loyalty. Apparently, customers just need to know how your product works and that it works well.

Better Feedback and Data Insights

Once you are KYC compliant, Know Your Customer compliance (KYC) provides a great opportunity to gain consumer data and have better insights into how your customer behaves. You can also use the onboarding process as an opportunity for feedback on your product/service.

Operational Efficiency

Automating your onboarding process can save your company time, overhead costs and service loads. Having automated KYC checks, email verification software and automated AML solutions with basic customer due to diligence can speed up the process and customers who understand your product/service will have fewer issues with adaptation and have fewer service issues.

Increased Revenue

Of course, once you increase loyalty and have better operational efficiency you are going to increase revenue.

KYC/KYB Compliance

Customer onboarding makes Know Your Customer and Know Your Business (KYB) compliance easier. During the onboarding process, you learn all about your prospect and their businesses especially, if they are a Business to Business (B2B) client.

The customer onboarding process is similar to that of the customer or hero’s journey. During the onboarding process, your potential customer passes through something akin to a sales funnel. They go from the awareness stage where they become aware of your product/service then you get the prospect to the discovery stage where they may test the product. From there, it evaluation when the potential customers can decide to become paying customers. Now, once they purchase your product/service, your goal is to build customer loyalty and encourage repeat business.

During this customer onboarding process, there are a few things that banks, corporations and small businesses should be aware of to have KYC and AML compliance while obeying Anti-Money Laundering (AML) Laws.

1. Customer Identity Verification

Knowing your customer is the foundation to proper customer onboarding. There must be a way to electronically verify your customer’s id and email thereby, validating the information they have provided.

Customer identity verification and validation is the first and most necessary step in the onboarding process. Age verification and Know Your Customer (KYC) can be done with global id verification using a global identity verification service with anti-money laundering technology or with an id verification partner to screen for basic customer due diligence.

Verification, which is done using IDMkyc, is needed to first identify the source of the documentation and check data records to verify that they were in fact issued by the governmental body the potential customer says they are from. Validation, which is done using IDMscan, is done using biometric facial recognition to confirm that this is indeed the owner of said documents. Validation is crucial to KYC compliance and can work seamlessly with IDMaml as your automated AML solution to reduce the risk of fraud.

During verification and validation, companies with anti-money laundering technology, global id verification and email verification software can identify Politically Exposed Persons (PEP) and Specially Designated Nationals (SDN) that can put your Fintech company, bank, corporation or small business at risk of being non-compliant with the Office of Foreign Assets Control (OFAC). PEPs need special consideration and risk management by banks and businesses while SDNs can put you at risk for hefty fines.

To protect your business or non-profit, you should use IDMkyc and IDMscan as your global identity verification service and id validation service and IDMkyb when onboarding business to business (B2B) clients.

2. Incomplete Basic Customer Due Diligence

If you can’t confirm the customer’s identity and you can’t verify their email using email verification software then they’re probably not who they say they are. Other signs of fraud include refusal to provide supporting documentation or documents from unreliable sources, source of funds inconclusive and credentials fake.

To combat the activities of your would-be fraudster, global id verification using a global identity verification service that has automated AML solutions with AML fraud detection and automated KYC checks. This ensures your fraudster is identified and kept out of your system.

Behavior monitoring should be done during and after the onboarding process to both customers and users to identify suspicious activity and the possibility of an imposter scam i.e. identity theft. In 2020, the Federal Trade Commission (FTC) reported consumers losing $3.3 billion dollars to fraud and almost 1.4 million reported cases of identity theft. These fraudsters used the stolen identities to get passports, government benefits and other government-issued documents.

For B2B companies, the best practice is to ensure that the company you are doing business with performs basic customer due diligence with global id verification and provides anti-money laundering solutions and services for their customers. They should also have full KYC and AML compliance and be compliant with the Corporate Transparency Act (CTA). Or you can use IDMkyb to get all the relevant data on your corporate client, that way, you are fully aware of company ownership and to whom your company’s money goes.

3. Non-Compliance with AML Policies

Yes, you are in the business to make money, but you don’t want money earned from fraudulent means. And if you don’t pay attention to who you are onboarding, you could be receiving money from drugs, human trafficking or stolen goods.

Under the Anti-Money Laundering Act of 2020, your company could be facing hefty fines if the Financial Action Task Force (FATF) or the Financial Intelligence Unit in your country discovers you are receiving money from suspicious sources.

To prevent being on the receiving end of those hefty fines or facing a shutdown, besides basic customer due diligence like address and global id verification, you’ll have to get an AML monitoring solution with anti-money laundering technology like AML fraud detection, AML monitoring screen software and use identity checks for money laundering. Working together with an experienced global identity verification service like IDMaml, to create an automated AML solution for faster AML fraud detection, verification and monitoring, you can be sure of your company’s KYC and AML compliance.

Since banks and Financial Technology companies are at a higher risk for money laundering activities, they usually face higher fines. So, there are usually more comprehensive AML solutions for banks and financial services. Banks and Fintech companies need to have their own additional in-house guidelines for KYC/KYB and money laundering.

4. Issues with Customer Onboarding Software

Even with strenuous testing and previous user onboarding, sometimes, problems show up mid-use that wasn’t planned for or even foreseen. This can affect your customer experience, onboarding process and even revenue.

Attempting to validate customer information without the proper id verification software, email verification software, AML screen monitoring software or using a trusted global identity verification service, AML monitoring solution or id validation service can cause problems when onboarding customers. Improper onboarding can lead to incorrect data, increases the risk of fraud and loss of revenue if your potential customer chooses to abandon the process.

No one wants to wait while you identify the problem and neither will they trust you with their data if your systems seem unstable. It also puts your product/service in a bad light as your potential customer can assume that it is faulty as well.

Opting to leave the onboarding process to the pros, is a better way of reducing the risk of your prospect abandoning the onboarding process and missing out on potential revenue. At IDMERIT, our cost-effective, GDPR compliant, global identity verification service has been tried and tested on Fortune 500 companies in over 100 countries for many years and we are committed to data protection and fighting fraud. Let us prove how we can give you the best and safest customer onboarding experience.

5. Opportunities to Make the Onboarding Process Easier

Besides having KYC and AML compliance and protecting your business and customers, other goals of customer onboarding are building trust and loyalty. At every stage of the onboarding process from sign-up to follow-up, you should be looking for opportunities to make the onboarding experience better.

Look out for ways to make it faster, safer and more user-friendly. You can ensure your onboarding process is mobile-friendly and can be done just as effectively on a smartphone as it is done on a computer. You can also have the onboarding process fully automated with automated KYC checks and automated AML solutions.

Constructive feedback and questions should be welcome at every stage of the onboarding process not just during walkthroughs, product setup or check-ins. Your potential customer should be able to interact with you from sign-up, during a data download and after purchase.

Seek ways to wow your potential sign-up by offering complementaries, freebies or swag packs as they go through the onboarding process to ensure they complete the process and encourage others to try your product/service. The incentive of early reward can result in free word-of-mouth advertising and a potential increase in revenue.

In your own company, we’re sure that there are many more opportunities you can find to reach out to your potential buyer and help them along the customer onboarding process. We at IDMERIT can be your automated AML solution assisting you with your customer onboarding process by providing AML fraud detection, anti-money laundering solution and service and id validation service to ensure you have to Know Your Customer compliance.

Closing

Paying attention to these five things during the customer onboarding process can make customer onboarding a seamless process for both the company and its clients.  Neither of you should have to worry about data protection, identity theft or fraud, having KYC and AML compliance or how long it takes. With IDMERIT’s skill in global identity verification services, they can verify, validate, reduce risk during the process and ensure B2B customers are also KYB compliant.

In the end, no matter how flawless your customer onboarding process is, you must provide value to your customers,  deliver on your customer service and continue to serve your customers long after they purchase. You can have a seamless onboarding process, but if you disappear when they have questions, you can end up with negative feedback and lose all the ground gained during the onboarding process.

However, IDMERIT can help you automate your entire customer onboarding process and monitor for any issues, protect your customer’s data and even make it mobile-friendly with automated KYC checks and automated AML solutions. IDMERIT’s trusted, cost-effective and comprehensive global identity verification service makes customer onboarding easier, faster and helps with KYC and AML compliance with global financial and security institutions. Let us prove we can do your customer onboarding process better. Talk to us today!

The post Five Things to Check for During the Customer Onboarding Process For KYC and AML Compliance appeared first on IDMERIT.

The luxury goods market also faces its share of fraud, counterfeit scams, and money laundering crimes.  In fact, two owners of Los Angeles-based import and export textiles company, Pacific Eurotex were recently sentenced and ordered to forfeit $3.1 million in addition to paying a $370,000 fine due to their part in a complex money-laundering scheme. 

Major categories of luxury goods include:

• Haute couture clothing 
• Rare art/paintings or sculptures
• A high-end automobile, such as a sports car
• A yacht (motor, sailing, catamaran, and gulet)
• Accessories, such as jewelry and high-end watches
• Upscale luggage and personal travel equipment
• Wine (premium, super luxury, icon, and rare vintages) 
• Homes and estates ($10M or more in-home valuation)

Illicit activity is growing throughout the luxury goods market especially in fashion, high-end jewelry, rare art, and the upscale real estate market. Fraudulent use of credit cards or identity spoofing are major issues that cause chargebacks and, in the case of identity spoofing, can even lead to complex forms of money laundering. 

Identity Theft: Stolen Credit Cards & Identity Spoofing 

“Of the 2.2 million fraud reports, 34% incurred a loss, up from 22% in 2019. These losses totaled $3.3 billion, with a median loss of $311. In total, the FTC reported 1,387,615 cases of identity theft.” (CreditCards.com) Identity theft and the use of stolen credit cards are extremely common crimes in different industries within the luxury goods market. Customer identity verification is the first step in protecting a brand. Understanding who your customers are, their past, and how to onboard them while protecting your most vulnerable assets, your products, is one of the most important steps a business owner can take.  

Global identity verification solutions build risk profiles from past financial behavior as a method to segment bad actors and eliminate risk to a luxury brand. 

The most common products bought with stolen credits card numbers by illicit actors include: 

• Mac books
• Rolex watches
• Smartwatches
• Diamond rings
• World of Warcraft gold
• Louis Vuitton handbags
• Cases for electronic devices
• Gift cards for iTunes and Best Buy

Fraud and chargebacks are extremely common in the luxury retail space and can derail an entire brand’s progress as well as its ability to be seen as a going concern. Identity verification services should offer robust fraud protection and transaction monitoring in order to keep bad actors out. Many of these brands do not have strict policies covering customer identity verification.  

Fraud in Luxury Retail

According to Shopify, “[t]he global e-commerce market is expected to total $4.89 trillion in 2021. That figure is estimated to grow over the next few years, showing that borderless eCommerce is becoming a profitable option for online retailers.” Identity verification services including Know Your Customer procedures are a mainstay to prevent fraud and stolen or counterfeit goods. 

Fraud in luxury retail happens in a few surprising ways. 

The common types of retail fraud taking place are:

• Vendor Theft
• Refund Fraud
• Employee Fraud
• Discount Abuse
• Sweethearting (false price adjustments)
• Cash Register Tampering
• Wardrobing (returning after use or “renting”)

“Consumers returned an estimated $428 billion in merchandise to retailers last year, approximately 10.6 percent of total U.S. retail sales in 2020. Of those returns, roughly 5.9 percent were fraudulent, equating to $25.3 billion,” according to a report released by the National Retail Federation (NRF) and Appriss Retail. During the return process, customer identity verification needs to be completed by scanning and verifying identity documents against watch lists and/or fraud databases.  This is why customer identity verification is important during the sale of retail goods – whether it be bulk purchases or one-off high-end luxury items. 

Cross-channel returns can present problems for a luxury brand. According to Vogue Business, this is “the ability to buy an item online and take it back in store — is the feature that affluent shoppers worldwide look for.” 

Synthetic Identity Fraud Hurts Luxury Retailers

Sophisticated fraud attempts against luxury retail brands are becoming more prevalent including the use of synthetic identities in order to access high-end luxury brands where possibly the premium identity verification services carry a lower burden or are nonexistent in order to resell goods even at a fraction of their MSRP price. Usually, in order to access high-end products, a new customer must furnish an ID card and use valid and variable information such as a social security number and credit card account information. 

When a bad actor attempts to create a synthetic ID, several tasks must be accomplished: 

1. A modus operandi (motive or goal) must be chosen
2. Real personally identifiable information (PII) must be sourced from a worthwhile target
3. Pieces of real and fraudulent information must be stitched together to create an identity the criminal can use to commit an act of identity fraud
4. The criminal must then knowingly use the identity to apply for some sort of benefit via a bank or organization and be able to fool the identity verification or know your customer solution 

Many criminals use brazen techniques to steal PII data or identify data out of dumpsters or even purchase this data on black market exchanges (in-person or online). Once the criminal acquires this information there are normally two routes to using the information after they are approved for services:  quickly attaining resources and maxing out a financial instrument or using the fraudulently attained resources to build a credit score up over time and simply disappearing after the entirety of funds are depleted.

So, what can luxury retailers do? 

1. Implement Eligibility Verification
2. Streamline Policies and Procedures
3. Upgrade Your Point of Sale System
4. Use acquiring banks with low chargeback thresholds 

In addition to high-end luxury retail brands, jewelers are a prime target for fraud. Customer identity verification should be a mandatory part of the purchase process. 

IDMscan is a robust fraud and compliance solution to help you comply with AML/CFT obligations. Contact one of our Identity Executives to get started. 

FineJewelers Face Identity Verification Woes

“Fraud in this industry goes back hundreds of years – before the internet, before credit cards,” Sourabh Kothari, director of Merchant Advocacy at Signifyd said. “People have been stealing jewelry for centuries, even millennia because it carries value and crosses borders.” Global identity verification solutions often aren’t focused on helping luxury jewelry brands protect themselves against fraud or identify repeat offenders. 

Examples of high-end jewelry brands that cater to premium customers include:

• Cartier
• De Beers
• Chopard
• Pomellato
• Boucheron
• David Morris
• Tiffany & Co.

One customer-facing identity verification policy listed on the website of trejours states, “In order to make sure that we are creating a safe and reliable marketplace where jewelry lovers and jewelry vendors can have a great experience, we take steps to verify the identity of every Trej member via the most trusted identity verification system used by major financial and banking institutions. We trust, but we verify.” It is this attention to detail and the “extra step” that protects this luxury jewelry marketplace available for customers to rent and purchase fine jewelry.

Picture-Perfect Crimes: Money Laundering & Fraud in the Luxury Art Market

According to a recent report by Transparency International on the art market, this industry is at higher risk due to the traditions of confidentiality and discretion in the art world, and that works of art can be both high-value and easily transportable.” This level of confidentiality and portability lend the industry to be ripe for potential fraud and money laundering.

Customer identity verification during complex transactions involving rare art including sculptures, paintings, and collector’s pieces. The Heritage Foundation, New York MET, and private art dealers and auctions are some of the many organizations in this industry at risk for fraud. Money laundering and proceeds from sales of illicit goods such as arms or counterfeit substances are a huge issue that until recently has gone undetected.   

In the United Kingdom, “art market participants” were included in the amended legislation. 

Art Dealers will be required to: 

• Conduct a risk assessment
• Appoint a Money Laundering Reporting Officer (MLRO)
• Document your AML policies and procedures

Due to this amendment, any art dealers or those engaged in the sale or trade of art valued at over £8,500 (approx. 10,000 Euros) must adhere to the requirements above. As the sale is being carried out, risk profiles need to be established and the level of risk of the parties needs to be determined and appropriate due diligence carried out. 

When makes a customer “high risk”?

1. “High-risk country” status – one or both parties are from a high-risk country
2. Politically Exposed Person (PEP)  – a client is susceptible to potential bribery or being engaged in public office and has a high level of trust
3. No face-to-face interaction – both sides of the sale are done virtually or through intermediaries

In addition to art dealers, sales of luxury yachts and homes are susceptible to money laundering and identity fraud. 

Are you an Art Dealer or Luxury Yacht Broker interested in fraud prevention and customer verification solutions?  Contact Us today. 

Money Laundering Through Sales of Luxury Yachts 

In general, “yacht models can range in price anywhere from $500,000 and upwards of $10,000,000, depending on size, year, and model.”(GalatiYachts) At this high of price point, there are numerous reasons for customer identity verification and, if the exchange is through an intermediary or across international waters, a global identity verification solution should be integrated into the sale. 

 As we look at the number of yachts sold during 2020, according to SuperYachtTimes, “2020 ended on 295 used yacht sales of vessels over 30 metres, compared with 278 in 2019. The all-important 30-40 meter market bore the brunt of the decline in new-build sales during 2020. 76 new yachts in this category were sold in 2020 compared with 98 in 2019.”

1MDB Yacht Seized in Landmark Money Laundering Case

A $250 million superyacht is at the center of a money-laundering story that is larger than the boat itself. “The quarter-of-a-billion-dollar boat is believed to be the property of Jho Low, a Malaysian financier with close ties to disgraced and defeated former Prime Minister Najib Razak.”(AMLPartners) Jim Low was part of 1MDB, an organization purportedly connected to officials high up in the Malaysian government including then-Prime Minister Najib Razak. Razak was accused of channeling over RM 2.67 billion (approximately US$700 million) from 1Malaysia Development Berhad (1MDB) for personal gain through his bank accounts. 

Three additional money laundering or drug cases resulting in the seizure or forfeiture of luxury yachts include:   

• 13 June 2021 – vessel ‘SY Windwhisper’ seized as 3 arrested after a tonne of cocaine was found onboard
• 8 July 2020 – ‘Sunrays’, seized by Royal Gibraltar Police (RGB) following ongoing operation into money laundering & cross border Transnational drug trafficking
• June 20, 2020 – US Department of Justice links $957m luxury yacht Topaz with 1MDB scandal

Customer identity verification is one of the most important aspects when discussing the sale or rental of high-end yachts or real estate. Yachts and high-end real estate sales are, again, prime targets for money launderers or fraudsters as the level of anonymity is usually kept quite high and can be done on a handshake or based on one’s reputation. Without careful risk assessment and customer due diligence throughout the sale, one or more parties can be easily swindled out of hundreds of thousands or millions of dollars.  

The yacht purchase and sales process can be quite daunting and involved especially with industry jargon and the high expectations of upscale, discerning clientele. 

The maritime and yachting world is rife with jargon (flag state, charter certificates, port state control, etc.), and the sales process adds to that with “listing broker” and “selling broker.” (Denison Yacht Sales) There can be many moving parts, parties, and problems that occur during the sale of a superyacht or luxury yacht. 

One overarching necessity is to have a robust global identity verification solution available to brokers, buyers, or sellers during these complex situations. 

Identity Verification in the Luxury Goods Market 

During a sale or transfer of funds between parties, several forms of fraud protection should be implemented. Notwithstanding current anti-money laundering regulations imposed by local regulators and legislative bodies, enhanced identity verification can save a brand time and protect rare assets from falling into the wrong hands. 

Identity checks are particularly important for banks and financial institutions to screen for money laundering, fraud, and past illicit financial activities. KYC, or Know Your Customer, is the process of verifying a customer’s identity to ensure they are providing accurate personally identifiable information (PII) as well as in order to understand their past financial behavior with previous institutions or money service providers. 

The Know Your Customer (KYC) process helps to ensure that the financial institution’s services are not misused for identity theft, money laundering, and the funding of criminal organizations. KYC ensures that organizations are both compliant and that customers with a suspicious financial background are not approved for an account at the bank or financial institution.

Several forms of identity verification exist include: 

• Biometric verification (facial recognition, iris identification, fingerprint match, voice comparison)
• Two-factor authentication
• Knowledge-based authentication
• Credit bureau-based authentication
• Online verification (remote or eKYC)
• Database methods (government pr LEO database records search)

IDMscan: Fast, Secure, & Global Identity Verification Solution

IDMscan can authenticate and verify government-issued identity documents in online and offline conditions. It is a part of several identity fraud solutions that IDMERIT has created which offer fraud detection before it happens. 

Our document verification solution provides powerful security in the airline industry, at home and abroad.

• Multi-Language support
• Integrate seamlessly with IDMaml and IDMdevice
• Easily integrate into your system with a simple API
• Biometric facial recognition & face liveliness technologies are used to produce a live match
• Validate your customers in less than 6 seconds
• We can validate Passports, Drivers Licenses and National ID’s from 175+ countries
• Indigenously built Deepfake recognition and liveness recognition models with the highest degree of accuracy in the world

Contact one of our identity specialists to Schedule a Demo of IDMscan today.

Follow our LinkedIn and Facebook pages for anti-money laundering news and significant regulatory changes.

About IDMERIT

Headquartered in San Diego, California, IDMERIT provides an ecosystem of identity verification solutions designed to help its customers prevent fraud, meet regulatory compliance and deliver frictionless user experiences. The company is committed to the ongoing development and delivery of offerings that are more cost-effective and comprehensive than other solution providers. IDMERIT was funded by experts who have been sourcing data on personal and business identities across the globe for over a decade. This access to official and trusted data throughout the world has become increasingly important as companies find themselves completing transactions across borders as a standard course of business. www.idmerit.com

The post Identity Verification and the Future of the Luxury Goods Industry appeared first on IDMERIT.

The Financial Action Task Force (FATF) proposed a law to apply the travel rule to cryptocurrency transactions, effectively making them completely traceable. The Travel Rule requires businesses who are engaged in or are an intermediary to, cryptocurrency transactions to collect and share the personal data of participants in a transaction. This rule already applies to wire transfers such as those completed through a bank or Western Union.

What Is The Travel Rule?

The Travel Rule is the industry term for the FATF Recommendation #16 focused on anti-money laundering efforts. The rule requires both financial service firms and Virtual Asset Service Providers (VASPs) to collect Personally Identifiable Information (PII) on transactions exceeding 1,000 USD/EUR.

In addition to basic biographical information, VASPs and banks are required to collect a further layer of information from senders during a transaction: their physical address, unique ID number (national identity number, etc.), customer identification number, or date and place of birth.

Initially, the Travel Rule only applied to banks. The Travel Rule’s scope was extended in 2009 to include crypto companies. The G20 and other jurisdictions have begun to incorporate the travel rule into their local AML/CFT laws to aid money laundering investigations and provide true transaction clarity. This change will undoubtedly assist law enforcement agencies and regulators during investigations and with the enforcement of anti-money laundering laws and regulations. 

According to FinCEN’s guidance report on this matter, a few frequently asked questions include: 

1. Are all transmittals of funds subject to this rule?

No. Only transmittals of funds equal to or greater than $3,000 (or its foreign equivalent) are subject to this rule, regardless of whether or not currency is involved. In addition, transmittals of funds governed by the Electronic Funds Transfer Act (Reg E) or made through ATM or point-of-sale systems are not subject to this rule. (January 1997)

2. What are the “Travel” rule’s requirements?

All transmittor’s financial institutions must include and send the following in the transmittal order:

• the name of the transmittor
• the account number of the transmittor, if used
• the address of the transmittor
• the identity of the transmittor’s financial institution
• the amount of the transmittal order
• the execution date of the transmittal order 
• the identity of the recipient’s financial institution

    and, if received:

• the name of the recipient 
• the address of the recipient 
• the account number of the recipient, and 
• any other specific identifier of the recipient.”

What is important to understand is that as this rule is being extended to VASPs and crypto transactions, the entire transaction traceability process will become much easier and less time-consuming.

Want to learn more about the Travel Rule and how it applies to your bank? Contact one of our  Identity Executives today. 

Who Regulates Cryptoassets & Crypto Exchanges? 

The European Union (EU) is composed of 27 member states, each of which has its own regulations and laws relating to cryptocurrencies and crypto exchanges. 

There are a number of banks and commissions which regulate the cryptocurrency industry/crypto exchanges including:

• European Commission (EC)
• European Central Bank (ECB) 
• European Banking Authority (EBA)
• European Insurance & Pension (EIOPA)
• European Supervisory Authority for Securities (ESMA)

These agencies have been busy proposing and implementing rules to build a strong framework that is intended to combat ML/TF and illicit activities including fraud, spoofing, and abuses of the financial system. 

Identity Checks For Money Laundering & Fraud Prevention in the EU

Identity checks are particularly important for banks and financial institutions to screen for money laundering, fraud, and past illicit financial activities. KYC, or Know Your Customer, is the process of verifying a customer’s identity to ensure they are providing accurate personally identifiable information (PII) as well as in order to understand their past financial behavior with previous institutions or money service providers. 

The Know Your Customer (KYC) process helps to ensure that the financial institution’s services are not misused for identity theft, money laundering, and the funding of criminal organizations. KYC ensures that organizations are both compliant and that customers with a suspicious financial background are not approved for an account at the bank or financial institution.

The essential documentation required for a successful Know Your Customer process is as follows:

Proof Of Identity (POI):

• A UID/passport, driver’s license, or voter’s ID card
• A PAN (Permanent Account Number) card with a picture matching the customer
• A current ID card issued by the State
• Any valid Debit or Credit card issued by a bank

Proof Of Address (POA):

• A copy of utility bills such as electric bills with a verifiable address
• Visa/Driver’s License with a digital picture
• A copy of a registered sale agreement or lease for residence
• Any identification document in the name of one’s spouse

Proof of Income/Past Financial Activities

• Income Tax Returns
• Credit Report
• Paycheck Stubs or Bank Statements

A new client may attempt to use one or more of the above documents for identity verification and the key for a bank/financial institution to understand is the vulnerable nature of current identification documents in the EU and worldwide. Despite security innovations, fraudsters are still engaging in many legacy techniques to fraudulently obtain access to a bank’s offerings.

European Union Moves Toward Full Transaction  Traceability, Applying the ‘Travel Rule’ To Cryptocurrency Transactions 

Are companies ready for this drastic shift? As of October 2020, according to the Finbold’s Bank Fines 2020 report, global authorities issued $13.74 billion in AML fines, with three large US banks, Goldman Sachs, Wells Fargo, and JP Morgan Chase accounting for over half of that total. Many crypto exchanges lack the necessary compliance procedures required to even begin to apply these laws. Many id verification solutions were not built to comply with the level of complexity required to root out potential bad actors and limit their access to modern bank systems. 

“These proposals have been designed to find the right balance between addressing these threats and complying with international standards while not creating an excessive regulatory burden on the industry,” the European Commission said in its statement.

The rule change will require that: 

• A company handling crypto assets for a customer must include the customer’s PII information. This would include the customer’s name, address, date of birth and account number
• Transfers must include the name of the person who will receive the crypto assets
• Providing anonymous crypto-asset wallets will be prohibited
• The recipient’s service provider must also check if any of the required information is missing

The drastic change in this rule seems to be that this information must be verified to be accurate and that anonymous crypto wallets will no longer be permitted. This rule change will definitely assist in transaction traceability during criminal investigations and retrieving transaction data. 

In a play on words, the Travel Rule ensures that personal data is shared with participating banks during domestic and international transactions. There literally is no way to avoid this transaction trail or transaction traceability because the personal data of the transacting parties ‘travels’ along with their transfers.

Interested in a robust fraud and compliance solution for your bank? Contact IDMERIT today. 

Will Anonymous Crypto Wallets Disappear? 

One of the major issues surrounding cryptocurrency transactions includes their ability to be monitored and regulated including transaction traceability especially when relating to cryptocurrency’s ‘anonymous’ crypto wallets. Modern id verification solutions must be able to collect, verify, and share data during the customer onboarding process or during these sometimes complex cryptocurrency transactions to prevent fraud and abuse. 

Bitcoin founder ‘Satoshi Nakamoto’ created Bitcoin with the intention that his financial system without ‘third-party intermediaries would be the wave of the future. One major tenant of this system would be that people would be able to send and receive funds anonymously. While this would be a major leap forward in fundamental privacy protections, this type of unregulated system would present a number of issues both in terms of oversight and the complete unfettered ability to commit illicit offenses such as money laundering, fraud, and terrorist financing. 

Building a ‘Harmonised Framework’

The EC and the FATF have since their inception advocated for uniformity in applying specific anti-money laundering and counter-terrorist financing regulations. In fact, both entities have been quite vocal about their views. 

“We shouldn’t have different rules for the financial system. They should apply across digital currencies as well,” said EU commissioner for financial services, Mairead McGuinness, during a press conference. 

Future of Cryptocurrency Transaction Traceability 

Implementing these rule changes will undoubtedly change the landscape for both cryptocurrency traders and regulators alike. Gone will be the days of drawn-out, costly, investigations as transactions will be easily resolved along with their senders and receivers. Cryptocurrency exchanges, banks, and fintech companies will need to adapt to the new regulatory climate, including enhanced identity verification solutions being the norm, not just the exception. 

IDMscan is a robust fraud and compliance solution to help you comply with AML/CFT obligations. Contact one of our Identity Executives to get started. 

IDMscan: Fast, Secure, & Global Identity Verification Solution

IDMscan can authenticate and verify government-issued identity documents in online and offline conditions. It is a part of several identity fraud solutions that IDMERIT has created which offer fraud detection before it happens. 

Our document verification solution provides powerful security in the airline industry, at home and abroad.

• Multi-Language support
• Integrate seamlessly with IDMaml and IDMdevice
• Easily integrate into your system with a simple API
• Biometric facial recognition & face liveliness technologies are used to produce a live match
• Validate your customers in less than 6 seconds
• We can validate Passports, Drivers Licenses and National ID’s from 175+ countries
• Indigenously built Deepfake recognition and liveness recognition models with the highest degree of accuracy in the world

Contact one of our identity specialists to Schedule a Demo of IDMscan today.

Follow our LinkedIn and Facebook pages for anti-money laundering news and significant regulatory changes.

About IDMERIT

Headquartered in San Diego, California, IDMERIT provides an ecosystem of identity verification solutions designed to help its customers prevent fraud, meet regulatory compliance and deliver frictionless user experiences. The company is committed to the ongoing development and delivery of offerings that are more cost-effective and comprehensive than other solution providers. IDMERIT was funded by experts who have been sourcing data on personal and business identities across the globe for over a decade. This access to official and trusted data throughout the world has become increasingly important as companies find themselves completing transactions across borders as a standard course of business. www.idmerit.com

The post EU AML Crypto Rule Update: European Union Moves Toward Full Transaction Traceability appeared first on IDMERIT.