What is Meant by Business Fraud?

Business fraud involves different illegal activities carried out by fraudsters so as to cause severe financial loss or damage to a company. Some of these include payment fraud, identity theft, and insider fraud. In order to protect businesses from possible threats, it is important that efficient and trustworthy methods should be put into place with regard to preventing frauds. Companies embrace advanced technologies such as pre-employment checks (both credit checks and background checks) as well as surveillance systems that enable them to prevent fraudulent acts before destroying huge amounts of funds through those acts.

How Fraud Prevention Companies Safeguard Businesses from Fraud?

Fraud prevention companies play an important role in preventing businesses from fraudulent activities. These companies provide secure and reliable fraud prevention solutions for businesses. Below are some fraud prevention techniques used for preventing businesses from fraud-

Utilizing advanced technology

They utilize advanced technologies such as artificial intelligence, machine learning, and data analytics to monitor and detect indicative patterns of fraudulent behavior. They focus on analyzing huge amounts of data in real-time, which helps identify suspicious activities and indicate fraudulent transactions if any.

Comprehensive Monitoring Systems

Fraud prevention companies set up comprehensive monitoring systems that track transactions, keep a record of interactions, and monitor user behavior across various channels.

Customized Solution for Industries

These companies deliver customized fraud prevention solutions according to the needs of specific industries. They address the unique requirements of businesses from industries like cryptocurrency, banking and finance, healthcare, online gaming and more.

Continuous Improvement and Adaptation

Fraud prevention companies follow a pattern of refining their algorithms and strategies and keep their solutions updated to effectively combat the risk of fraudulent activities. They focus on revising their methodologies and techniques to stay ahead of fraud tactics. They are open to adaptation so that it becomes easy to detect upcoming threats and actively implement measures to safeguard businesses from fraud.

Importance of Fraud Prevention Solutions

Fraud prevention solutions cannot be neglected by businesses who are trying to safeguard their reputation, assets and customer trust from getting destroyed. They play an extremely pivotal role in protecting businesses from fraudsters and also push the companies towards minimizing financial losses, avoiding regulatory penalties, and help maintain business their brand integrity. Identity verification and background screening services are two key components of fraud prevention solutions, ensuring that businesses transact with legal entities and minimize the risk of fraud.

Businesses should keep in mind the following criteria before investing in any fraud prevention solutions. These are as follows-:

• These should include attributes like data analytics, solutions, real-time monitoring, advanced software integration in current infrastructures.
• In buying fraud prevention services, they must put into consideration scalability and flexibility. It is supposed to take on future fraud problems as well as fight them off when they occur.
• Businesses must look for various fraud prevention methods like biometric authentication, KYC verification, age verification, ID verification, document verification, video KYC verification, AML verification, and business verification, and behavioural analysis. Infusing multi-layered fraud prevention is essential for robust fraud prevention.
• Integration with existing systems is another crucial factor businesses must think about when investing in fraud prevention solutions.

Industry-Specific Solutions

Banking and Finance

Fraud prevention solutions are necessary for banks and other financial institutions in order to protect themselves against fraud and loss. These include such things as strong authentication mechanisms, AML measures, and transaction monitoring.

Cryptocurrency

Cryptocurrency is a digital platform for buying and selling with cryptos. Consequently, the use of blockchain technology that provides safety for assets has been suggested by fraud prevention companies.

Fintech

Such companies in the Fintech industry are adopting ground-breaking software solutions that guarantee an exhaustive coverage of comprehensive security systems for example biometric authentication coupled with behaviour analysis against fraudsters. This objective is aimed at detecting fraudulent activities in e-transaction channels.

Healthcare

In the healthcare sector, the goal behind having a system that can identify your patient verification is developing reliable mechanisms in accordance with health regulation policies thereby monitoring claims while preventing fraud in billing as well as personal information theft cases.

Insurance

Between predictive analytics and anti-fraud algorithms, fraud prevention solutions deal with false claims often made by dishonest insurers.

Online Gaming

The Online gaming industry employs fraud prevention solutions for player authentication, account monitoring and preventing minors from payment fraud.

How Can IDMERIT Help?

IDMERIT has a complete range of fraud prevention solutions that are customized to fit individual business requirements and protect against fraud risk and compliance issues. Using sophisticated technological systems, innovative thinking and insight, IDMERIT helps banks and other businesses know their customers’ true identities, identify transactions as genuine or not and effectively manage risk. Our cutting-edge technology and sturdy identity verification solutions give us an edge over ever-increasing fraud threats.

For guaranteed anti-fraud solutions, all global businesses should secure the operations by partnering with trusted companies like IDMERIT. Defend your business from any kind of fraudulent activities using IDMERIT’s unrivaled fraud prevention tools. You can contact us at idmerit.com; our experts are here to engage in a discussion with you.

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Anti-money laundering regulations become more stringent every year as do the associated fines. On January 1, 2021, Congress passed the National Defense Authorization Act for Fiscal Year 2021 (the NDAA), which includes the most substantial and sweeping improvements surrounding AML legislation. This omnibus bill includes amendments to the USA Patriot Act which address a wide range of gaps in previous legislation.  The US’ AML Act 2020 (AMLA) was designed to address changes in the technological landscape and the lack of motivation (monetary or otherwise) for whistleblowers to share AML information with authorities.

Key Provisions of the AMLA 2020

The AMLA 2020 brought forth major changes and amendments which strengthened the penalties for non-compliant banks and financial service organizations. Major changes include:

• Stringent AML Enforcement Through Improved Compensation For Whistleblowers
•  AMLA 2020 Expands Existing BSA/AML Violation Penalties
• AMLA 2020 Legislation Allocates More Government Resources Committed to Address Money Laundering 
• AMLA Provides Additional Statutory Authority for DOJ to Seek Documents from Foreign Banks & Financial Institutions
• The AMLA References a Pilot Program To Share SAR (Suspicious Activity Report) Data Across International Borders
• The AMLA Extends the BSA’s Reach To Cryptocurrency (Nontraditional Value Transfers)

7 Anti-money laundering Compliance Fines You May Have Missed

“Financial institutions have been hit with $10.4 billion in global fines and penalties related to Anti-money laundering (AML), Know Your Customer (KYC), data privacy, and MiFID (Markets in Financial Instruments Directive) regulations in 2020, bringing the total to $46.4 billion for those types of breaches since 2008,” ComplianceWeek reports. Failure to comply with Anti-money laundering laws and regulations brought heavy fines in 2020 and continues to increase. Below are seven of the largest fines levied on banking & financial institutions:  

1. 2019 Data Breach leads to Capital One fine of $80 Million 

The US Office of the Comptroller of the Currency (OCC) levied an $80 million civil fine against Capital One in August for its mismanagement and inadequate security systems. According to Fortune Magazine, “the bank’s own internal audit failed to identify “numerous weaknesses” in its management of the cloud environment and ‘engaged in unsafe or unsound practices that were part of a pattern of misconduct.’”  The breach compromised over 140,000 Social Security numbers and 80,000 bank account numbers. Paige Thompson, a former Amazon Software Engineer, stands accused of stealing personal identifiable information (PII). Charges include computer fraud and “abuse for an intrusion on the stored data.”

Large gaps in information security and Anti-money laundering regulations influenced the adoption of the most recent AML legislation which helps support previous computer security and fraud legislation. While Thompson’s motives may still be under investigation, proper employee vetting through background checks and PII security policies are paramount to ensuring these types of breaches do not occur. Banks and corporations are required to follow stringent information security guidelines to avoid large fines and public scrutiny. 

2. OCC Issues $85 Million Penalty To Usaa Federal Savings Bank

The OCC slapped USAA Federal Savings Bank with an $85 million fine for risk management inadequacies in October. This is the second fine this San Antonio bank has been levied with. According to the Office of the Comptroller of the Currency (OCC), “bank’s failure to implement and maintain an effective compliance risk management program and an effective information technology risk governance program.”

Risk management and compliance programs including Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) are mandated by the Bank Secrecy Act and recently passed Anti-money laundering (AML) legislation. Large fines and penalties are being levied around the globe as banks and covered financial institutions (and cryptocurrency exchanges) fail to build proper compliance programs.  

3. Swedish Bank SEB Fined $107 Million by Regulator For Baltic AML Failures

Skandinaviska Enskilda Banken (SEB) received a $107 million fine in June for Anti-money laundering (AML) failures. SEB, the second largest bank in Sweden, has been fined for failing to  , Swedish Financial Supervisory Authority (FSA), the regulatory authority, charged the bank in early June of 2020 and levied the fine which highlights the global issues revolving around Anti-money laundering compliance in the financial services industry, “Despite the elevated risk of money laundering in the Baltics, the bank has done too little, too late,” says FSA director general Erik Thedéen.

Basic AML due diligence includes identity verification, validation, and age verification (to name a few). Not only are AML violations on the rise, victims of complex schemes and fraud are rampant within money service provider industries. 

4. Western Union Refunds $153 Million For Scam Victims

“Western Union turned a blind eye to the fraudulent payments made through its money transfer system,” says Andrew Smith, director of the FTC’s Bureau of Consumer Protection. Western Union began refunding defrauded customers in March after they were ordered to by theFederal Trade Commission (FTC). The lack of Know Your Customer (KYC) compliance can severely damage an organization and harm millions of account holders. 

According to the United States Federal Bureau of Investigations, “The FTC’s complaint against Western Union alleged that for many years, Western Union was aware that fraudsters around the world used the company’s money transfer system to bilk consumers, and that some Western Union agents were complicit in the frauds. The FTC’s complaint alleged that Western Union failed to put in place effective anti-fraud policies and procedures and to act promptly against problem agents.” While in this case, Western Union is said by Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, to have “turned a blind eye,” more banks and Money Service Providers (MSP’s) are unaware of the mandatory KYC/AML regulations that can protect them from these types of horrible situations.  

5. Citi To Pay $400 Million Occ Fine For Risk Management Failures

One of the world’s largest financial institutions, Citi Bank, has been ordered to pay $400M in a case that brings to light severe risk management issues. The South Dakota bank was found to have been lacking internal controls and financial safeguards including those relating to AML and data governance. According to the consent order, Citibank needs to complete a “thorough redesign of data architecture, re-engineering of processes, and modernisation of system applications and information technology infrastructure.” This is the second fine in which Citi has been hit with in recent years showing its glaring need to update and comply with regulatory mandates and internal financial controls. 

6. Westpac Agrees To Record Aud 1.3 Billion Fine For Aml Failures

Westpac, one of Australia’s largest banks, agreed to pay a record AUD 1.3 billion ($959m) fine for money laundering breaches in September. According to court filings and Fintech Futures, the financial institution, “failed to keep records related to the origin of the transactions, or carry out “appropriate customer due diligence.” These are major lapses in AML compliance procedures and this underscores the need for both proper, and timely, Know Your Customer compliance as well as ongoing transaction monitoring. 

Westpac admitted to 76,000 additional violations including, “failures to reasonably monitor customers for transactions related to possible child exploitation”, and “further failures to assess money laundering and terrorism financing risks.” Compliance officers should take note of the challenges that exist for large banks and reevaluate their preparedness in order to avoid fines and penalties such as those seen in the above cases. 

7. Compliance Lapses & Fraudulent Accounts Generate Billions In FInes For Wells Fargo

Wells Fargo bank, the fourth-largest in the US, will pay a hefty fine of $3 billion for its failure in security procedures. The Security and Exchange Commission will receive $500 million of the total and plans to use the funds to offer restitution to those customers who were defrauded by Wells Fargo. According to Fintech Futures, the bank “pressured employees to cross-sell products and services, leading them to create millions of fake accounts using forged and fraudulent customer signatures.” Proper Know Your Customer compliance procedures and fraud weren’t incorporated into the account opening process as internal documents showed that, “[e]mployees of the bank were found to be using their own contact details on application forms, so as to ensure that the real customer was never informed about the accounts opened in their name.” 

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 on-going 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

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