RegTech The Case for Financial Inclusion

RegTech: The Case for Financial Inclusion

The FinTech industry has grown tremendously in recent years, introducing both scale and efficiency in new banking technologies. According to Statista, at an annual growth rate of 18%, the global transaction value in FinTech is expected to grow to $8 trillion by 2022. But according to research by Thomson Reuters, the financial industry spends at least a day, weekly, to track regulatory shifts which can be increasingly time-consuming and costly. So as the fintech and compliance costs continue to grow, RegTech seems to be getting global attention from the financial sector, as well. 

Traditional financial service providers (banks, insurance, transactions, and payment services, mobile wallet payments) have no option but to catch up with changing tides, in order to survive the technology revolution. From cutting costs to providing seamless transaction experiences, FinTech and RegTech both have changed the way individuals and businesses manage money. 

The world has witnessed more transparency in banking, and, financial transactions are thriving with the use of disruptive technologies such as AI, machine learning, and blockchain. Fueled by the advent of the internet, FinTech has now grown to taller heights with mobile payments and online banking. 

Reaching the Unbanked

One of the marked success of this digital wave is how it has led to increased access for previously unbanked populations, largely due to mass outreach of mobiles and the internet. Now, mobile phones are making it possible for more and more people to enter the global financial system, albeit with limited access to services such as mobile payments and transfers. 

The mobile money market is witnessing a revolutionary transformation fueled largely by:

  1. Growing focus on customer experience
  2. Diversified financial services structure
  3. Evolving regulatory landscape
  4. Expanding mobile money services

Mobile money accounts, as well as text and app-based financial accounts, are providing financial coverage to growing global populations. A small but rising percentage is also taking advantage of smartphone technology around the world. However, this is subject to the availability of adequate underlying infrastructure such as power supply. The challenge is greater in developing countries where only 40% of adults have access to both the internet and mobile phones, as opposed to 82% in high-income economies. 

Online Security and meeting global compliance is still a topmost priority for customers and businesses alike. For this reason, digital banks are also focusing on RegTech in banking solutions for building long-term trust in the market.

How RegTech and FinTech are related

A large customer base is currently left unserved in the financial services industry due to a lack of the right infrastructure. As the FinTech revolution continues to benefit the economy and break into new markets, it promises to close gaps in financial inclusion. However, this comes with high risks of exploitation that need to be managed. 

Currently, 1.7 billion people in the world are unbanked, down from 2 billion in 2014. This is one of the most challenging pain points for financial service providers. FinTech is changing this, and RegTech can accelerate the process.


How RegTech is Relevant to FinTech


RegTech startups are experiencing growth and investment at almost the same rate as the FinTech industry. Firms are realising the need to capitalize on compliance efficiency and use it for a competitive edge in the industry. There is great potential for powering the future of financial regulation by integrating technologies into supervisory systems used by banks.

RegTech has major implications for financial institutions in the form of reduced regulatory costs and improved operational efficiency. With far-reaching benefits for the economy, RegTech in banking is also aspiring to drive growth and profitability by better regulatory reporting and risk management, as well as transaction monitoring. 

This is especially relevant for emerging markets, where a notable percentage of the population can experience compounded benefits from access to services like micro-credit and remittances. The effective use of RegTech in banking strikes a balance between access to credit and credit security. 

With machine learning, artificial intelligence, and e-KYC (Know-Your-Customer) verification methods, the gains are far-reaching. Fraud mitigation and reduced compliance costs make it possible for FinTech to include more financially excluded population segments. Automated KYC processes through RegTech ensure that foolproof methods for legal use of financial services can be made effective. Using API code, RegTech can also simplify complex regulations that optimise compliance costs of time and labor. 

Both financial institutions and regulatory authorities see added value in the adoption of RegTech for better compliance and service delivery. APIs for data collection and reporting have also shown a marked improvement in customer engagement, as well as compliance. 

RegTech solutions and AML compliance

RegTech solutions are increasingly used by financial institutions to comply with the regulation of anti-money laundering and the evolution of other financial crimes. There is no denying the fact that eliminating the crimes of money laundering has been one of the biggest challenges for financial institutions over the years when new and improved methods of money laundering are on the rise. But regulatory technology (regtech) is helping financial institutions to eliminate financial crimes through regular AML checks, set into motion by regulatory authorities. 

Regtech solutions for AML compliance offer a cost-saving solution to the financial sector for real-time identity verification, crime monitoring, and reporting. It not only improves the efficiency of the entire system but also reduces operational costs altogether. 

With the use of intelligent technologies, RegTech in banking is a frictionless solution that can reduce time by easily screening people against vast databases. The regulatory landscape is subjected to regular change, this evolution of regulatory trends affect the business operations directly. That’s why RegTech solutions and AML compliance is the need of the hour. 

Service offerings by RegTech

Driven largely by business demand and technology innovation, there are five main service offerings by RegTech :

  1. Regulatory reporting
  2. Risk management
  3. Identity management and control
  4. Compliance
  5. Transaction monitoring

Challenges in Financial Service Delivery 

As financial services become more digitized and pervasive, regulatory systems need to adopt more forward-thinking ways of digital transformation. 

The foremost challenge in providing digital financial services to previously unserved populations is risk management. In most cases, financial authorities are still learning their way into the digital revolution. If vast amounts of data are collected without apt use of APIs, serious data security concerns could arise. This could undermine the regtech revolution and make the onboarding process more complex for new entrants.  

Supporting infrastructure in the form of digital databases is also absent in most cases. While there is a steep demand for mobile money accounts, some key services such as government payments (pensions, wages, social benefits) are still paid in cash. This reinforces financial exclusion for large segments of the population who could otherwise benefit from services such as mobile payments. 

Additionally, stringent identity verification requirements, such as those in KYC, get in the way of digital relevancy. National identity document verifications are sometimes not enough to ensure that people from remote areas can open an account and other local documents are required for account opening. This opens up a range of opportunities for the RegTech industry to influence financial service delivery, and in turn financial inclusion. 

RegTech Solutions: Closing Delivery Gaps

Across the globe, traditional financial systems are increasingly embracing technological advancements and committing to streamlining regulatory networks. Regulatory sandboxes and ‘reg labs’ are now being facilitated for innovation, to cater largely to the spike in RegTech solutions and AML compliance in both developed and developing countries. 

Sandboxes are controlled spaces for tech firms to test out new technologies under the regulator’s supervision. In addition to offering room for innovation, RegTech sandboxes can also be used as effective feedback and communication channels between FinTechs, regulators, and RegTech solution providers. For financial inclusion, this means balancing innovation and risk to reach underserved customers. 

Improving access to mobile money markets also depends a great deal on the efficient implementation of KYC regulations. In areas where access to financial services is a challenge, fulfilling tedious document verification requirements can be a cumbersome task. This stands in the way of scaling mobile money networks, hence hurting financial inclusion. 

This is where RegTech plays a central role. By simplifying customer onboarding processes, through efficient use of AI and HI, the mobile money industry can get a real push. The use of innovative e-KYC technologies such as biometric authentication and digital ID systems can make the process more efficient. 

With tangible results in the form of financial stability and customer engagement, investment in better regulation technology is being recognised as key to an efficient financial system. A sound regulatory environment, with regtech applications that support risk management, will ensure that economies reap maximum value from the FinTech revolution.

identity verification

Identity Verification entails a lot more than customer verification

Identity theft and digital fraud are on the rise. Cybersecurity is of essence for all the organisations and digital businesses dealing with consumer data. With the increasing number of high-profile data breaches, and online frauds affecting millions of consumers, online identity verification of stakeholders has set off as a significant requirement for businesses of every size.

While the COVID-19 pandemic has transformed major business operations introducing remote processes, establishing trust among consumers and organizations is now inevitable. Be it a customer onboarding or business partnership, identity verification is vital for almost every operation. 

“According to VMware Carbon Black report, there’s an increase of 238% in cyberattacks from February to April 2020”

The future of identity verification

The term verification has been used for ages, that refers to the checks or proofs about existence, correctness and truth of something. Talking about identity verification, it generally indicates a process for validating a person’s identity by confirming the personally identifiable information against real human claiming that identity. 

Given the pace at which markets are shifting towards the digital sphere, identity verification is the need of the hour to secure business and to provide consumers with a seamless customer experience. From in-person identity verification to online customer authentication through AI-powered SaaS products, the ID verification market has evolved already. Looking into the crystal ball, it’s safe to say that identity verification holds a bright future in the business industry.

identity verification

Identity Verification – Going beyond customer verification

Identity verification is a lot more than “show your ID card to enter the club” or “ present your driving license to officer to prove your age”. The AI-powered ID verification goes beyond customer verification and the advancements in technology are enhancing the scope and evolution of the industry. Identity verification is a powerful tool to perform simple consumer verification to complex corporate screenings and remote biometric authentication, read below to explore more about these advancements. 

Know your customer through digital ID verification

Over the past few decades, the concept of know your customer or KYC has gained traction in the financial world. Considering the rapid increase in the digital and financial frauds, regulators have made it mandatory for every organization, dealing with money, to comply with KYC regulations. ID verification and customer due diligence are the minimum compliance obligations of reporting entities. 

Identity verification is an inherent part of the KYC process that enables businesses to securely onboard new customers and to authenticate existing ones in real-time. The best approach to fulfilling these compliance requirements is to choose multi-factor authentication or multi-layered authentication by using a combination of various ID verification services (such as document verification, address verification, and biometric authentication) for customer verification. Multi-layered verification approach provides a quick, convenient, and frictionless customer experience with minimum error rate. 

Read more: Instant Client Onboarding with E-KYC Screening

KYB – Protect yourself from shell companies 

Living in the digital era, identity verification isn’t just applicable to humans. Individuals aren’t the only ones posing threat towards an enterprise; corporate entities (partners, corporate consumers, affiliates, etc.) can be equally threatening and that’s the base of the concept of Know Your Business (KYB).

Identity verification for businesses to detect shell and swindling companies and saves organisations from falling into the trap of fraudsters and enables them to stamp out aggressors. Moreover, with EU rolling out stringent regulations for customer due diligence and FINCEN’s requirement for companies to be aware of Ultimate Beneficial Owners (UBOs) before commencing a relationship, business verification is a pressing priority. 

Minor protection through age verification

With digitization and technological advancements, access to the internet has never been this easy for children as it is now. This ease of access has pushed children into the pit of darknet and as a result, not just the children but their parents and associated businesses are suffering as well. Identity verification plays a vital role in facilitating businesses to comply with age verification laws through real-time online age verification.

Unlike the traditional age gates, AI-based age verification solution incorporating document and face verification service efficiently authenticates the age of the individuals before allowing them access to age-restricted products and services. Because of sophisticated technology, the age verification process is instant and provides highly accurate results to ensure that buyers of age are not shunned away due to false positives or time consuming verification processes. 

Fraud detection and prevention

Digital frauds including identity theft, account takeover, Card-Not-Present (CNP) and chargebacks frauds, all have one thing in common, i.e. unauthorized access to credentials. Fraudsters get past the verification gateway due to lacking or inefficient authentication checks. Binary checks (username and passwords) are not enough to identify imposters. AI-powered identity verification serves as a productive tool to mitigate these frauds. 

Various ID verification services ensures that only authorized users are accessing the services or applications. Through a liveness detection feature, businesses can ensure that a real accredited user is present on the other end at the time of verification. Moreover, the intelligent verification solution detects any spoof attacks that con artists may use to bypass authentication checks. All this is done within seconds, hence, identifying identity thieves in real-time.

3 ways to protect

3 ways to protect your organizations from coronavirus cyber security threat

  Due to the spread of the coronavirus, the world adapts to new ways of working. Cyber criminals are proving themselves as adaptive as ever at finding innovative ways to exploit new cybersecurity vulnerabilities of businesses. These criminals are coming up with different tricks to exploit a system in this pandemic. It is paramount that businesses look for ways to better understand the risks to their organizations and learn how to mitigate or eliminate those risks.  

Cybercriminals are continuously exploiting the ongoing pandemic and fulfilling their malicious intent. In this pandemic, cybercriminals are taking advantage of the situation escalating their malicious activities. According to the “100 Days of Coronavirus” report by Mimecast, malicious cybercrime activities have increased significantly by 33% from January to March 2020. 

This situation is alarming, businesses need to take proper steps for cybersecurity to mitigate the risk of cybercriminal activities. In the name of updates about coronavirus, many fraudsters are becoming successful in identity theft, data breaches, and other online scams. Following are the three ways how businesses can stay a step ahead of such activities in this pandemic:

Guarding against coronavirus phishing attacks:

According to a report, 71% of cybersecurity professionals have reported an increase in security threats since the virus outbreak has shaken the world. The top of these threats includes phishing attacks-fake emails sent for coronavirus updates supposedly sent from well-known companies in order to induce individuals to reveal personal information. Among the other, most common threats are malicious websites (32%), malware (28%), and ransomware (19%) as per experts. 

SP Infographic

Cybersecurity threats are not a domestic issue but span across all countries and impact all sectors. Businesses need to learn how to better prevent attacks and protect themselves. In fact, in a recent Federal Bureau of Investigation (FBI) report, the agency reported that cyber actors have engaged in phishing campaigns by deploying ransomware at medical facilities and by creating fake COVID-19 websites that quietly download malware to victim devices. This underscores the importance for businesses to use cybersecurity best practices, such as:

  • Rule and Policy for Telework:

Make rules or policies for telework for your business, and make sure the employees comply with them. Businesses offer differing guidance on bringing your own device (BYOD), so be sure you comply with your organization’s policy.

  • Strong Security of Internet Connection:

Businesses need to protect their digital communications from eavesdropping. Configure your home Wi-Fi router for strong security and ensure it is protected with a hard to guess password.

  • Secure Virtual Private Network:

Businesses having a virtual private network client, have to use it on their telework device. Enable basic security features (e.g., antivirus, multi-factor authentication) if using personal devices.

  • Keep Updated Softwares:

Keep all devices patched and updated in your organization to combat certain cybercriminal activities.

  • Do Not Open Suspicious Links:

In these moments it is best to be cautious and verify identities. So do not click on any links or open any attachments that you find suspicious and were not expecting. To assist in this regard the Australian government has a website that gives information on how to prevent phishing attacks and know which elements in emails set off alarm bells. These are enlisted here:

  • Requests for money, especially if urgent or related to overdue bank account changes.
  • Suspicious or Unwanted Attachments.
  • Requests to check or confirm login details or credentials.

Ways to conduct safer meetings

As many companies shifted to remote work cybercriminals also understand that the physical IT infrastructure for many companies has shifted tremendously. Securing online meetings are a top concern for remote workers. As even by now many software have fallen foul of privacy concerns like Zoom. So always use your organization’s approved web conference platform to avoid data breaches and other online scams. 

  • Use digital identity verification to authenticate new participants as they join in.
  • Keep on changing the passwords.
  • Do not record the meeting unless necessary. 

As the way businesses work has quickly evolved, so cybercriminals’ tactics have become advanced too for exploiting these new ways of collaborating. This means it’s especially important to rely more closely on existing cybersecurity standards.

Integrate Identity Verification Solutions:

The pandemic is affecting businesses globally. Digital transformation is substantial for every sized business during this pandemic to continue their activities. To ensure customer sustainability in this challenging time, digitally active businesses are playing best to fight risks of digital security. Businesses can verify their customers online by deploying eKYC practices.

eKYC ensures customer identity verification online by document verification using OCR technology and video KYC verification process. Such identity documents include ID card, passport, driving license, etc.  By verifying customer information through these documents, businesses can operate seamlessly. The process is simple and the information from the documents is extracted using OCR technology and the identity is verified based on that data by screening it against sanction lists and PEPs.

A video KYC is another method in which KYC business experts connect the customer on a video call and conduct the process of customer verification which includes both documents and behavioral verification of the customer. In this way, all the customers can be authenticated to shield the scammers away from the system and add an additional layer of cybersecurity.

Moreover, biometric technology can be used to enhance the authentication process. By using 3D liveness detection features of facial reaction technology individual’s real presence can be authenticated to mitigate the risk of deep fake or spoof attacks. So in order to comply with regulatory authorities and to authenticate an individual for cybersecurity measures businesses need to have proper identity verification solutions integrated into the system. This will screen out all cybercriminals and businesses will be a step ahead. 

Read more : How businesses can prevent fraud during COVID-19.

Politically Exposed Person - An unsaid threat to Businesses

Politically Exposed Person – An unsaid threat to Businesses

A politically exposed person or PEP is the one who has been assigned to perform prominent public functions or the one who has a high profile role in society. Due to their position, they can commit money laundering offences and other related corrupt activities like terrorist financing. This thing has already been confirmed by many case studies and analysis reports. There is a proper list available that has all names of PEPs known as the PEP list. Such people are a high risk for the financial sector as they are more likely to become involved in financial crimes like money laundering and financing of terrorists than other people. PEP status highlights additional risk involved, so businesses must apply additional AML/CFT measures when establishing a business relationship with these persons. 

PEP status does not predict criminal behaviour but signals the businesses to be more vigilant. Businesses must conduct proper monitoring to ensure that they do not miss a change in PEP’s risk profile. PEP monitoring requirements are not indicative of criminal behaviour but are just preventive in nature. The evident potential risk factors associated with PEPs justify the application of additional preventive measures when it comes to establishing business relationships with PEPs. In order to avoid reputational and regulatory damages, organizations should understand how to recognize a politically exposed person (PEP) and their associates. 

Defining Politically Exposed Persons

This term first emerged as “Senior Foreign Political Figure ” in the wake of an Abacha Affair which was a money-laundering scandal in Nigeria, this case jolted global efforts to secure the abuse of financial institutes by the public figures. 

PEP, according to FATF Recommendation is defined as following

“Individuals who are or have been entrusted with prominent public functions in a foreign country, for example, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.”

According to EU Third Anti-Money Laundering Directive:

“Natural persons who are or have been entrusted with prominent political functions and immediate family members or persons known to be close associates of such persons.”         

Three Major Types of PEPs:

The AML and CFT Act identifies three major types of PEPs which are as follows:

Domestic PEP

A person who has a prominent public position or has a role in a government body.

Foreign PEP

Someone who holds a prominent public position or a role in some other country is considered as a foreign PEP. 

International organisation PEP

A person who has a high position in an international organisation, such as the United Nations (UN), the World Trade Organisation (WTO) or the North Atlantic Treaty Organisation (NATO).

List of PEPs- A Detailed Insight:

Financial institutions and businesses can categorize PEPs as:

Government Officials

Current or former government officials that are in domestic or foreign government positions including heads of states, individuals working in executive, administrative, legislative, military or judicial institutes in various elected or unelected roles.  

Political Party Officials

Officials that are appointed to senior positions in major political parties at home or in foreign countries. 

Senior Executive:

Individuals who are serving in senior executive roles, for instance, directors or board members in government owned or foreign organizations.

Family Members

Family member, the immediate one, of a political or government official, or of a senior executive. For instance, spouse, parents, children, siblings, or spouses’ parents or siblings. 

Categories of PEP

Categories of PEP


The Subjective Nature of PEPs:

To define politically exposed persons there is no single international standard so far. Subjective judgment has to be made in order to decide if an individual is politically exposed by taking into account the associated risks. These may be influenced by their seniority and time spent out of the office if they were ever in an eligible PEP position. In the same way, there is no defined objective on whether an individual qualifies as a family or a close associate. 

FATF Recommendations for PEPs:

There are confirmed risks associated with PEPs that justify stringent measures to be taken to put a halt on financial crimes such as money laundering, terrorist financing, and others. Businesses are required to take preventive measures before establishing a relationship with such persons. Businesses to perform a proper PEP list screening whenever a new customer is onboarded to check the criminal history and associated risks. FATF requires countries to ensure that financial institutions implement measures to prevent the money laundering through financial institutes by PEPs and to detect potential misuse whenever it occurs. The requirements are preventive and to be on the safe side. Moreover, businesses cannot refuse business relationships with PEP just because the client is in a PEP list. FATF measures extend on a broader spectrum to fight against financial crimes such as money laundering and not to put PEPs behind bars. 

Identification of PEPs:

To comply with AML regulations and to trace and tackle PEPs, businesses need to have a proper procedure in place. Any business entity should know when to check for a PEP and why to check for it. PEP record should be integrated in the system of every business so that the onboarding customer is screened against it and to nullify the associated risks and criminal activities. In this regard, strict Customer Due Diligence along with PEP screening must be performed before establishing a business relationship with any customer.  

Legal Entity Identifier (LEI) — what it means and how it helps financial institutions?

Legal Entity Identifier (LEI) — What it means and how it helps financial institutions?

The need for trusted digital communication in this age is crucial due to increasing cybercrimes. The digital world is prone to several challenges among which data protection is the one more prevalent and disastrous. With the flow, the incoming regulations come up with the need for stringent security measures for the protection of customer data, digital surveillance, business identification, and a clean clientele. Legal Entity Identifiers (LEIs), therefore, are in place, that help businesses introduce transparency in the system as well as onboard a clean customer base.  

Today, financial companies are active in introducing various financial services and products in the market without disclosing the relationship and associations with the companies. The ambiguity in company bonds, their names, and affiliations can lead to several unfortunate regulatory issues. Therefore, an independent UK’s financial regulatory body, the Financial Conduct Authority (FCA) was established that regulates the financial enterprises, provides services to consumers as well as maintain integrity among the financial markets in the UK to ensure transparent trading. 

In 2011, the LEI system was developed in response to the financial crisis in 2008. Supervised by the LEI Regulatory Oversight Committee (LEI ROC), central banks and other financial regulators, the Global Legal Entity Identifier Foundation (GLEIF) was put in place to support the global adoption of LEI. In December 2012, LEIs were issued for the first time and till September 2018, about 1.2 million entities registered around the world.

LEI 20-characters are divided into three parts. In the number, 0-4 characters contain the identification number of issuing organization, 5-18 contain a company identification number, and 19-20 are the check digits. The LEI helps financial institutions, policymakers, and regulatory authorities to trace the connections in the financial system. It provides a unique identifier for the entities that participate in financial transactions. It is accessible in the publicly available updated databases. LEI generates the following substantial benefits for financial businesses:

  • Clear regulatory reporting 
  • Accurate identification of adverse party exposures 
  • Increased operational efficiency
  • Free of charges database management 
  • Improved business risk management 

It also generates efficiencies for financial companies in internal reporting, risk management, and in collecting, cleaning, and aggregating data. In addition, the LEI is expected to ease companies’ regulatory reporting burdens by reducing overlap and duplication with respect to the multiple identifiers reporting firms must manage.

What kind of legal entities can register an LEI number?

The companies that want to register with an LEI are required to contact the LEI issuing organization. Companies then need to provide the required information to issuers and pay the fees. The information is validated by them against an authentic source, for example, business registers and if verified, LEI is assigned. To register an LEI number, most commonly the issuers ask the company to provide the name and address of legal entity as listed in the official business registers, country and subdivisions codes, date when first LEI was assigned, and date of latest updates in LEI information. 

The following are some legal entities that can register an LEI number: 

  • Financial institutions
  • Registered companies
  • Registered subsidiaries
  • Non-profit organizations
  • Sole proprietors
  • Credit rating agencies
  • International business branches
  • Funds and trust

An international branch office belonging to the same country in which there is the head office of an organization does not need to register again because one LEI is issued per country.

Who needs LEI?

The use of LEI is in the process of implementation by regulatory authorities such as EU, Canada, the US, and the Asia Pacific. LEI is required by the following EU regulations as well as directives:

  • Market Abuse Regulation (MAR): Financial instruments issuers and the reporting of entities involved in suspicious transactions
  • European Markets Infrastructure Regulation (EMIR): Brokers, beneficiaries, CCPs, and counterparties
  • Securities Financing Transactions Regulation (SFTR): Groups involved in financial transactions, securities and beneficiaries 
  • Prospectus Regulation: Securities issuers that are admitted for trading purposes in the EU regulated market as well as offered to the public
  • Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) 
  • Alternative Investment Funds Directive (AIFMD): Real-estate funds and managers
  • Capital Requirements Regulation (CRR): Credit institutions and banks
  • entities
  • Solvency II: Insurance groups and firms, financial resources and pension funds
  • Credit Rating Agencies Regulation (CRAR): Credit rating agencies
  • Central Securities Depositories Regulation (CSDR): CSDs and their participants

How does LEI help financial institutions?

The banks and financial institutions are facing challenges while monitoring high-risk entities. Especially the borrowers that are located out of the state or country and have borrowed a huge loan becoming a high-risk entity for the bank. Tracking these borrowers is difficult as they do not have a unique identifier. When the registry started growing up, legal firms and sole proprietors started borrowing huge amounts from the banks, if that amount is above the one specified by the banks, the entity is obliged to register an LEI number to help institutes trust them and trace the ultimate beneficial owner. 

The borrower companies whose clients are not located in the region they operate in, for example, credit rating agencies, banks, and other financial institutions, they can access the publicly available database to gather credible information related to the clientele. Therefore, it deters the risk of fraud the legal entities can bring for the financial businesses. Moreover, verification of beneficial owners can be done that on the other hand is a benefit as well as a regulatory requirement. This helps financial institutions actually know who they are dealing with.

The global business infrastructure is getting complex so is the tracking of fraudulent entities. To combat the risk of fraud, demand for business identification is growing. Therefore, LEI helps businesses identify the legal entities in the publicly available updated databases to perform identification in a clear and quick manner. LEI is becoming a business development and growth tool internationally.

How machine learning changed facial recognition technology?

How machine learning changed facial recognition technology?

We are entering a new era of fast and secure authentication clubbed with a perfect storm of digital transformation. The convergence of AI and biometrics is a part of this transformation and as with many technological breakthroughs, this transformation is not down to the advancement in a single technology. 

The implementation of face recognition has seen many iterations starting from its origin in the 1960s when it was manually implemented with a RAND tablet (a graphical computational device). The technology was incrementally refined during the last century. However, adoption of facial recognition on a large scale became possible, thanks to the breakthrough of deep machine learning in the early 2010s. In this article, we will try to elaborate how machine learning has changed facial recognition technology and the impact it has on the development of robust authentication systems.

The facial recognition market is expected to grow to $7.7 billion by 2022 and it’s because the technology has all kinds of commercial applications. From airport security to healthcare and customer authentication, face recognition is now widely adopted around the globe. 

What part does machine learning play in face recognition mechanism?  

Deep machine learning or deep neural networks are about a computer program that learns on its own. The fact that it is called “neural” or “neural network” comes from the basis that the technology is inspired by the human brain’s properties to transform data into information. It is a variant of the more general concept of machine learning, which in turn is part of a more comprehensive concept called artificial intelligence.

With deep machine learning, an algorithm serves training data and delivers results. But in between input and output, the algorithm interprets the signals – i.e (training data) – in a number of layers. For each new layer, the degree of abstraction increases.

Say, you want to build a deep neural network that can differentiate different faces or that can determine which faces are identical. Training data should then be a large number of images of the faces. The larger the dataset, the more accurate the network, at least in theory.

A computer does not “see” a face in the image, but several values ​​representing different pixels. With the pixels as a background, the deep neural network learns to find patterns. For each layer passed in the network, some patterns become more interesting (stronger signal between the “neurons” in the network) while others are nonchalant (weaker signal). During training, the “weights” of the various signals are varied to produce the desired result better and better.

The first, second and hundredth time the algorithm performs this procedure, the results are usually not as good, but eventually, the network can achieve impressive results. In a way, one can say that the network has learned to abstract and generalize, from raw pixel values ​​to the classification of different people’s faces.

But that is perhaps not what we humans think of when we use terms such as generalization; it is rather the network has worked out some metrics that are unique to each face. If the pre-trained network is served a new image on a face, the network can match its measurement values ​​to the faces on other images. If the network generates roughly the same values ​​for different images, it is likely the same person on both images.

It is called deep machine learning because such a model can use multiple – sometimes a hundred layers. This is symbolic; humans cannot understand how the computer program finds patterns. It operates in different layers.

Although the algorithms are developed and refined as they are, there are two other reasons behind the breakthrough of the deep neural networks: access to large datasets and cheap computing power, especially in the form of graphics cards that were most often associated with computer games.

It may also be borne in mind that the method described above for classification purposes is only one of many but is commonly used. 

Anti spoofing techniques for face recognition

While converging machine learning algorithms with face recognition makes it more accurate and fast, there is another feature that makes machine learning a must-have for face authentication – Anti Spoofing. This innovative technology shows a lot of promise and has the potential to revolutionize the way we access sensitive information.

Even though face recognition is promising, it does have some flaws. Simple face recognition systems could easily be spoofed by using paper-based images from the internet. These spoof attacks could lead to a leak of sensitive data. This is where the need for anti-spoofing systems come into play. Facial anti-spoofing techniques help prevent fraud, reduce theft and protect sensitive information.

Presentation attacks are the most common spoofing attacks used to fool facial recognition systems. The presentation attacks are aimed to subvert the face authentication software by presenting a facial artefact. Popular face artefacts include printed photos, replaying the video, 2D and 3D facial masks.

AI-based anti-spoofing technology has the ability to detect and combat facial spoofing attacks. With features like 3D depth perception, liveness detection, and microexpression analysis, our deep learning based facial authentication system could accurately analyze the facial data and identify almost all kinds of spoofing attacks. Shufti Pro detected 42 different spoof attacks in 2019. Among these 3D face mask attacks were in high volumes – almost 30%.

Machine learning-based presentation attack detection algorithms are used to automatically identify these artefacts to improve the security and reliability of biometric authentication systems.

Machine learning-based face verification systems rely on 3D liveness detection feature for successful detection of spoofing attacks including 3D photo masking, deep fakes, face morphing attacks, forgery, and photoshopped images. Liveness detection verifies whether a user is present or is using a photo to spoof the system.

What to expect in the future for facial recognition?

The human face has already become a perfect means of authentication and will have more impact on the digital transformation in the future. By using the face as an identifier, we are already able to open an online account, make online payments, unlock the smartphones, go through checking control at the airport or access medical history in the healthcare sector. 

In general, facial biometric technology has widespread potential in four categories: law enforcement and security, online marketing and retail sector, health sector, and social media platforms. AI-empowered face recognition technology has the potential to become predominant in the future. 

One of the future implications of technology is identifying facial expressions. Detecting emotions with the help of technology is a difficult task but machine learning algorithms have the promising potential to automate this task. By recognizing facial expressions, businesses will be able to process images and videos in real-time for better monitoring and predictions hence saving the cost and time.

Although it’s hard to predict the future facial recognition technology with the rapid growth and adoption of technology, it will become more widely adopted across the globe with more sophisticated features.

Identity verification in social Media - Lighting up the dark side

Identity verification in social media – Lighting up the dark side

Social media is a word every one of us can relate to. With every passing day, it is penetrating into our lives more than ever, completely transforming the way we communicate and interact with each other. The way we are using social media platforms is leaving a major impact on our life. Undoubtedly, it is overcoming the distance constraint by bringing people closer giving them space to connect. However, with the expansion of social media, the risks around people are also growing rapidly.

As the number of active social media users is increasing, more information is getting placed online. This has unveiled the untold threat of hackers, cybercriminals, and malicious interlopers mining your personal data for any personal or financial gain. Most of the time these bad actors intend to steal the consumers’ data and carry out indecent activities such as bullying and harassment.

Data is the New Currency

Living in a data-driven world, the rapid adoption of digitization is giving away a lot more than we think. All thanks to the prompt explosion of the internet that the global number of active social media users is estimated to be 3.196 billion; which is up 13 percent from the previous year and this growth of users isn’t going to stop anytime soon. Among all the platforms, Facebook is leading the market with 1.86 billion active monthly users.

These figures provide insight into the readily available data of users on social media. The users’ profiles on these networking sites pose a serious threat to their identities. These threats include multiple security concerns, data privacy risks, data breaches, digital frauds, and identity theft, etc.; the reason why social media platforms are arguably under scrutiny.

Not just social media, but any channel that incorporates personal information is under risk that the data will be exposed unintentionally and accidentally, for example, through a data breach, or intentionally by imposters and cybercriminals. The disclosed data can be sold on the dark web which is later on used for identity theft, impersonation, and carrying out fraudulent activities such as opening credit, taking a loan, etc.  To say data is the new currency for cybercriminals won’t be an understatement.

Impersonation and Account Hacking

Hackers, spammers, cybercriminals are increasingly targeting social channels because of the presence of billions of users. Due to advancement in technology, getting into someone’s account is no more of a difficult task. Phishing attacks, social engineering tactics, brute force attacks are some of the most common ways of assisting cybercriminals to target and access the user profiles. 

The compromised social media accounts are heaven for imposters, and hell for the victims because once they get into your account, they can easily impersonate you and can perform any activity they want to. Social media accounts are more appealing targets for these criminals for they are linked with multiple other and are more effective to spread hate, malware and viruses, and scam people as compared to conventional email.

It’s the human psyche that we tend to trust the messages that are received from friends instead of some stranger. People are careful in opening links that they get from third parties, however, they are more likely to fall prey to impersonated accounts perceiving it to be their friends’ profiles. Even worse, the user profiles reveal a lot of personal information, for example, name, date of birth, location, etc., that cybercriminals can leverage for identity theft.

Identity theft can be further used to open bank accounts, credit cards, take loans in the victim’s name. Imagine receiving notice from the bank to return the loan which you didn’t even recall taking. It means someone is abusing your identity for his personal benefit and financial gains.

Cyberbullying and Harassment

The anonymity on social media is one of the major reasons for cyberbullying and harassment. Everyday we come across a harassment incident making news headlines. Though bullying has always existed, social networking channels have paved new ways for the predators to bully, harass, stalk and blackmail people online while staying anonymous and without the fear of being caught.

Making fake profiles on social channels like facebook, twitter, Instagram, etc. is not rocket science. By entering fake credentials, one can easily create a profile and perform whatever activity without any supervised monitoring or verification. Social media threats are not always from strangers, but it can be from someone we know seeking vengeance. Imagine waking up one day and witnessing your private information shared on some other profile. It’s like a privacy nightmare.

Such negative incidents leave a lifetime impact on the mental health of an individual which are often associated with anxiety, depression, low self-esteem, and even suicidal thoughts. A study reveals that the students who experience cyberbullying are two times more likely to attempt suicide. Moreover, suicide has become a leading death cause of people age 10-34 years.

Minors are no longer Protected

The widespread use of smart devices among children and their curious nature to explore everything online has pushed them into a dark pit. Minors are actively seen making social media profiles that are exposing them to the dark side of the tunnel. The existence of stalkers, pedophiles, predators and other criminals on the social media channels is nothing new, however, the unsupervised account monitoring and ease of creating profiles have led to a negative encounter with minors.

Over the past few years, many incidents of minor abuse have been reported. Though social media is not for children, yet a huge proportion of active users are under the age of 18 years old. The reason is the lack of proper age and identity checks to ensure that only authorized users can create profiles. This has grabbed the attention of the cybercriminals presenting them another opportunity to exploit children’s identities. A study states, the minors bullied online are nine times more likely to fall for digital frauds and identity theft.

How Identity Verification helps

The convenience of creating fake profiles on social media platforms are pushing the social channels into the dark pit. Taking advantage of this limitation, cybercriminals and fraudsters are coming up with multiple tactics to exploit the consumers’ data and use it for their personal and financial benefits. Not just them but predators, pedophiles and other bad guys out there are fully taking advantage of social media platforms to carry out their immoral activities like harassment and bullying.

The root of all these dark activities is the inability of social networking channels to verify the customer profiles at the time of creation and further putting verification and authentication checks to ensure that the account is accessed by authorized users only. Digital identity verification serves as a strong defense against such troublemakers and facilitates social platforms to get rid of the bad guys making social media a safe source of entertainment for users.

Moreover, based on the principles of artificial intelligence, ID verification solution exhibits age verification service to hinder the presence of minors on social media. It is not just a moral obligation of the business to ensure minors’ security and safety but also to efficiently meet regulatory compliances regarding minors’ online protection and user verification.

Identification, Verification and Authentication - Cut from the same cloth

Identification, Verification and Authentication – Cut from the same cloth

The modern era of technology has brought so many frauds to light. The digitized world has urged business to take measures to stay at a safe side. Increasing ratio of data breaches, compliance regulations, and identity theft have made it an uphill task for businesses to establish trust online. But due to these reasons it’s more important than ever to have a sound verification system. The ubiquity of users on the internet has significantly raised the number of digital frauds. Due to many available digital identity solutions manual checks have long been forgotten.

From the start of the identification of an individual to the recurring authentication procedure to validate that the person trying to access the system is the same person you think he is. Identification, verification, and authentication play a crucial role in keeping online channels free from fraudsters, to comply with KYC/AML regulations, and to provide enhanced customer experience. In this blog we’ll be discussing the differences between identification, verification and authentication in context of online identities. 

What is Identification?

Identification means the procedure of someone claiming to be a certain person. They can identify themselves with their names. It is simply like we assign different names to the folders in our computer and then differentiate or identify each folder by its name. For instance, when a user goes to a bank to open an account he can identify himself with his name, email address, or phone number on form. Same is the case with online shopping, when purchasing something online by entering your credit card detail and billing address you are giving an identification of you. 

Using identification process alone is like asking someone what is your name or who are you and considering the information as truthful and taking the answer as face value. Identification alone is never adequate in this world of fraudsters. Having someone declare their identity without actually verifying it is nothing more than a suffice. How can we be sure that the person who is on the other side of the computer is who he says he is? That is where verification comes on the stage. 

What is Verification?

Verification is something more than just asking who you are. It takes another level and validates if you are actually who you say you are. This step provides a high degree of confidence that the identity is accurate. Identity verification process is basically building bridges between who someone claims to be and who he really is. It establishes a trustworthy link to embed into the onboarding or account opening process. 

The process starts with the verification of government issued ID cards/ documents. With the use of document verification experts and latest technologies like OCR for automated data extraction and machine learning one can confirm that the provided document is authentic and valid. It can be validated if the document is fake or tampered. So verification is the next step to actually ensure that the provided information is right and accurate. 

It takes effort to verify someone’s identity to a high degree of certainty. If a business does not have stringent standards to verify an identity they can rely on traditional methods of verification such as knowledge-based verification. But such information is less reliable these days due to the prevalence of private data on the dark web. Such businesses lacking proper verification solutions are at the risk of falling into the pit of fraudsters as they do not know who they are actually dealing with. At the time when businesses want to provide a frictionless onboarding process, they may cut corners and want a low barrier to entry. Social media accounts, for instance, ask the user only to provide email address, username, password, and phone number for good measures. This information is not sufficient unless it is properly validated. 

The verification requirements are more stringent for online bank account opening though. In the financial sector there are numerous regulatory acts to prevent scammers from opening false bank accounts for criminal activities like money laundering and terrorist financing. Businesses are beginning to make a shift to biometric technology to verify customer’s identity at the time of onboarding to comply with regulations. Only by clubbing identification with verification can you be confident that you know who you are dealing with in the future.

What is Authentication?

Verification is a one time process, but once verified identities should be authenticated each time the individual is accessing the system. If you know someone you can authenticate him by looking at him but in this digitized world most of the transactions occur online or with people we don’t know personally so businesses need to put a system in place to authenticate the fact that person is who he says he is and not an imposter. Such a system validates that they are the same person who registered for services. Authentication is as simple as providing  credentials such as a password which is associated with a certain username.

There are certain number and quality factors incorporated to strengthen an authentication system. The higher are the factors employed and levels the more efficient is the authentication system. For instance for a social media login you have to provide username and password (things that you know) but for bank account you need to go through a form of authentication (things you have). So the level of authentication differs with different services. 

However the first two types of authentication are no longer counted as valid due to the availability of excessive amounts as a result of massive data breaches. So the most authentic system requires you to validate things you are by verifying identities paired with biometric technology using facial recognition, fingerprint scanning, iris scanning, or voice recognition as proof for your authentication.

In a nutshell, these are like stages to actually answer the question that the person is who he says he is. Digital identity verification solutions are paramount to assuring the authenticity of digital identities across public and private sectors and to put a halt on pervasive scams like identity theft, data breaches and other digital scams. These solutions should be a part of both authentication and onboarding of clients.

OCR technology for businesses - Its applications and benefits

OCR technology for businesses – Its applications and benefits

Optical Character Recognition (OCR) technology provides a business solution that automates data extraction from an image file or scanned document containing written or printed text. The extracted text is then converted into a machine-readable form that is further used for data collection, processing, and analysis. 

OCR is a widespread technology used in various business operations to streamline the process of data extraction from the documents. It is capable of reducing the overall time it takes in manual data extraction and entry. 

The technology started prevailing in the early 1990s while digitizing the historic newspapers. It then came through several startling improvements that today it is able to sleekly extract the data from documents and automate the global business processes. With constant advancements in the past few years, OCR technology has reached a remarkable accuracy of more than 90%. 

User access to information is improved with advanced OCR technology that can extract data from a variety of text formats/templates such as invoices, contracts, ID documents, financial statements, receipts and many more. These digital files can be searched from a repository to find the required document, viewed, edited, and repurposed to send the information to other systems.

OCR technology gaining grounds at the business level

Automated OCR technology has abridged business workflows and operations. Businesses can employ technology to reduce the resources as well as save time in data collection and management. With high accuracy and robust OCR technology, businesses can extract data from multiple electronic or paper document formats. As the world is moving towards digitization, businesses around the globe are adopting innovative solutions in their workflows that could reduce the human effort, speeding up the processes and aligning well with the customer needs. 

The following are some benefits that OCR technology brings for the businesses;

  • Reduced manual identification: Businesses need to identify each onboarding individual. They can use OCR technology to automatically extract the customer details and verify it.
  • Reduced cost: Automated document verification reduces human effort and therefore reduces the cost while providing improved services to customers.
  • Substitute manual data entry operations: The business operation that includes the collection of customer information can employ OCR technology to feed the identity document to the system and get all the customer information from the document in seconds. 
  • Save human resources: The number of employees to manually enter the customer details in sheets can be reduced by integrating OCR services to their system. Hence, human resources can be minimized. 
  • Boost up the business workflows: With automated data collection and processing, businesses can speed up their processes that can ultimately boost the business revenue. 
  • Reduced error-rate: Businesses can reduce the error-rate as a result of manual data entry. AI-powered OCR system intelligently extracts the user information while mitigating the errors. 
  • Improved business productivity: Robust data collection process eventually improves business productivity. The resources that previously used to perform operation manually can be utilized in other useful work. 
  • Automated content processing: OCR technology extracts the information from documents and fills it in the fields accordingly. For example, it will extract the name from an ID card and fill it in the system storage against the field of ‘Customer Name’.

AI-powered OCR technology employs strong underlying algorithms and techniques that make it possible for businesses to compete in the digital world with respect to robustness and accuracy. For example, the banking industry has a lot to do with the paperwork. To comply with the regulatory requirements such as KYC/AML procedures or to ensure a clean customer base, there is a need for document verification. 

Now the digital world demands digital solutions and so online banking emerged with a variety of online services. In this industry, identity verification via documents is the primary step that helps onboard honest individuals to participate in the legitimate financial system. Now the challenge of online document verification can be met using OCR technology. The online user aiming to open an online bank account would require to upload an official identity document, for example, an ID card for identity verification. OCR technology embedded in the document verification will extract the data from the user-uploaded document by identifying its format. 

Using various algorithmic techniques, the data will be extracted and verified. An automated data extraction process reduces the overhead of manual data entry in the banking industry. The information is stored and can further be used for other purposes. 

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OCR technology for businesses

Use-Cases of Optical Character Recognition for Businesses

Conversion of a printed/scanned paper into machine readable form – An operation of many businesses. Before OCR, only one option that businesses had was to re-write/type the text that was a time-consuming process and prone to errors. The labor-intensive tasks are now replaced by automated OCR technology in businesses around the globe. The old texts are easy to access, search engines are using OCR to index the documents, number plate recognition can be done automatically. Other than these, the following are use-cases of Optical Character Recognition (OCR) technology:

Information retrieval

A searchable PDF format is one of the use-cases of OCR. The business systems that use OCR software convert the image-only PDF files and paper documents into searchable files. Unlike normal PDF files, these digital searchable files have an invisible overlay that contains searchable text. For this, OCR technology is used that acts as a digital system to find out the keywords, phrases, names, and other required information from those files. 

Greater security with cloud storage

The paper documents are hard to secure from any unauthorized access. They can be stolen, misplaced or damaged easily. With cloud storage, it is easy for the companies to secure data in an efficient manner, providing a controlled access and protecting it from the breach. OCR technology helps extract data and store it on the cloud. 

Small, medium and even big-sized enterprises prefer cloud storage to physical storage space. Cloud-storage makes it easy for smart devices and companies to access the data anywhere, on any smart device. OCR technology helps companies store the extracted data efficiently to the cloud where the users can access, read and edit the data easily. 

Reducing costs

Advanced OCR solutions help businesses reduce the cost of hiring a professional for data entry. The OCR system is integrated into the whole system infrastructure and it extracts each receiving information. The manual data entry by professionals is replaced by an automated system. For example, to submit the utility bill online, the user just needs to upload the previous paid bill and the system will automatically extract the data from it. Now the need for active professionals on their seats to look for each request is entertained using OCR technology. Moreover, the cost of shipping, copying, and printing is reduced and companies can manage all the data in digital form rather than keeping a pile of documents that occupy large spaces.

Time Optimization

Business operations save time by utilizing OCR technology in their data extraction processes. With a better accuracy rate, OCR software reduces the error rate and optimize the time it takes to complete a task. Moreover, it paves the way for the company towards productivity and greater revenue generation. 

Digital Identity Verification

The online businesses aiming to ensure a clean customer base are either required to perform identity verification to secure businesses or comply with regulatory requirements. Digital document verification against government-issued identity documents can help online businesses filter out bad actors. OCR technology is used in document verification in which an online user uploads an ID card, passport, driving license or credit/debit card, etc. to verify a person. With OCR, the information is extracted automatically and verified within seconds.  


Online businesses scan the hard copy of the invoice of their customers after importing them into their system. The extracted data is validated automatically to check its credibility and accuracy. The slip can be categorized accordingly and moved to the accounting system. In this way, the whole system is automated after analyzing the content and moving it to the relevant set. 

Shufti OCR has got your business covered. With its remarkable accuracy of more than 90% and fast real-time results, Shufti Pro helps businesses automate their data extraction processes. In mere seconds, the banking industry, e-commerce, digital payment services, and many more can pull out the user information from any type of document by taking advantage of OCR technology. This reduces the overhead of manual data entry and time taking tasks of data collection.

Shufti pro offers both options of onsite verification with or without OCR.

Establishing trust in Open Banking through Identity Verification

Establishing trust in Open Banking through Identity Verification

Over the last few years, open banking is becoming an emanated global trend. This rising trend is driving a significant change that how individuals and businesses are going to consume financial services since the industry is shifting towards a data-driven digital economy. Businesses are struggling to provide more reliable opportunities to customers that can efficiently overcome the new challenges posed by the new digital ecosystem.

The expanding customer-centric regulatory frameworks are pushing organizations to leverage the latest technology innovations and offer comprehensive control to customers over their data and identities in the digital sphere. The fully integrated digital ecosystem demands seamless navigation of businesses as well as individuals across the ecosystem without worrying about onboarding experiences.

Open banking is undoubtedly a beneficial innovation and like traditional banking, integrating effective and seamless Know your customer (KYC) and Anti-money Laundering (AML) process remains a primary focus of the industry. The main challenge to industry-wise KYC initiative is to balance between security standards and the customer experience and establishing trust in the open banking sector.

Shortcomings in the Traditional Verification Process

Identity has traditionally been verified through the physical provision of documentation that confirms a person or a business. Historically, the acquisition of goods or services required face-to-face interaction and, therefore, the presentation of verification documentation didn’t create a significant burden. The evolution of digital channels has resulted in increased remote availability of goods and services, but the corresponding identity verification process has largely been left behind. The failure of identification services to digitize in line with evolving digital channels has led to issues that must be resolved if the promise of an increasingly digital economy is to be realized for customers and financial institutions.

Challenges in Open Banking

These challenges lead to a lack of trust in open banking, also banks are still reluctant to embrace the digital shift due to high-rates of cybercrimes in open banking. 

1- Need for detailed Information of Customers 

Open banking relies on big data, collected from the customers. Even if manual customer onboarding is practiced, customers are required to provide a lot of information, and legal identity documents that are hectic and demotivates customers, who demand more from the technologically advanced banking industry. And if online information is collected the risk of fake customers or identity thieves is high. 

2- Lack of Standardized Verification Mechanisms 

Open banking is the collaboration of banks and tech companies to provide better customer experience. As this concept is still new there is no standardized process to execute open banking systems. Ultimately it has an impact on economies of scale and customer retention. At times the project turnover is not as expected, due to lack of standardization which is present in typical banking operations. Banks have no predefined and centralized system for customer security during open banking data sharing. 

3- The Risk of Digital Service providers 

Banks are not the only one that has challenges, the digital service providers also have several challenges to handle once they have access to customer data. Data collection through the integration of data transfer APIs is the very first step, the digital service providers can’t rely completely on the data provided by the bank. They also need to practice security on their platform. For this security, they need some equally competent solution that would not affect customer experience. 

4- Lack of Customer Awareness 

Customers are gradually accepting the advantages of open banking. Older people are less likely to allow such data sharing, but the case is different with Millenials. Therefore customer education regarding the scalability and pros/cons of open -banking is vital. 

This is also one of the challenges of open banking. Banks and digital financial solutions need to invest in customer education to get the most out of open banking. They need to show some sort of visible security measures to gain customer trust. 

5- Bad Customer Experience 

Customers allow for open banking to get a better online experience and to streamline their financial activities. So it is evident that they demand more from their banks and tech companies who use their data to give a customized experience. This enhanced customer experience gets tarnished with long on-boarding processes and weak security measures of online data collection and sharing. It also becomes a hurdle in gaining customer trust. 

Competition is increasing and providing enhanced customer experience is the key to success. The onboarding process is vital to gain retainable customers, and manual verifications leaves a bad impact on the customer onboarding experience.  

6- Demanding laws for Digital Banking 

The technological advancements have boosted the profits of banks, but it is controlled with stringent regulatory obligations. Banks and digital financial solutions are bound by a list of compliance obligations, under customer due diligence, cyber protection laws. 

KYC (Know Your Customer), AML (Anti Money laundering) and data protection laws are the primary concerns of reporting entities. Fulfilling these laws in online spaces requires highly competent solutions because manual verifications fail advanced cybercrimes. 

7- Increased Cybercrime 

Banks and their third party affiliates, both are exposed to cybercrimes. Banks face the risk from their customers and businesses. Customers might give wrong information or use a stolen/synthetic identity to onboard, while the business might be a fraud. Not every prospect is reliable and a business opportunity might turn to be the biggest liability in the form of a data breach. 

In case a business misuse the data of the bank’s customers, the regulatory authorities will question the banks first and it will affect the market value and credibility of a bank. 

Online KYC is the Solution

All the above-mentioned challenges are keeping many financial institutions from embracing revolutionizing banking advancements. Online KYC/AML and KYB screening are the solutions for these problems. 

Online KYC screening solution screens the customers in real-time through their identity documents. Banks can utilize from its enhanced version which is video KYC. It performs online KYC through a live video call with the customer. Video KYC expert verifies liveness, and the identity documents and face are verified through artificial intelligence. It is the substitute for in-person verification and allows high security that banks need to practice in case of remote customer onboarding. 

AML screening solution screens the customers against the global sanctions list, blacklists, and PEPs lists. It ensures that criminal entities are not onboarded. 

KYB or Know Your Business screening verifies a business entity in real-time by collecting the information related to that entity from reliable sources and also screens it against blacklists and watchlists. Ultimately enabling banks to build transparent B2B relationships. 

These solutions are designed to counter all the challenges mentioned above. 

1- The enhanced Customer Experience (friendly interface) 

The interface is developed while keeping in view the diversity of the customers and businesses that connect with banks. Easy to use interface enhances customer experience as the necessary information is collected within seconds with easy to perform steps for the end-user. 

2- Global Scalability

The primary motive of open banking is to increase the scalability for financial services. These AI-based solutions have the ability to perform KYC/AML and KYB screening on business entities from any part of the world. So the businesses need not worry about the secure onboarding of international clients.

3- Aligned with Data Protection Laws enhances Customer Trust

Data protection laws are quite strict for banks and businesses that benefit from data sharing. For instance, GDPR and CCPA require the reporting entities to practice vigilant security measures to ensure the security of customer data. 

AI-based identity screening solutions are aligned with the data protection law to provide peace of mind to the banks, while they’re entering the digital revolution through open banking. It is a big relief as data is the primary asset of open banking and compliance with the data protection laws enables banks to fully utilize it. 

To wrap up, the world has evolved digitally and the need for adopting revolutionary technologies promises a prosperous future of the banks and businesses. Banks and digital businesses can achieve huge benefits from this fusion, but securing it with digital identity screening solutions ensures unparalleled growth and profits.

Top 6 Trends in Anti-Money Laundering for 2020

Top 6 trends in Anti-Money Laundering for 2020

To enhance the scope of AML compliance, new regulations were brought into force throughout last year. In this demanding regulatory atmosphere, financial institutes are expected to adapt to the needs of evolving and competitive financial ecosystems.The key concept of 2020 for AML compliance is the investment in the collaboration of credible data, human intelligence, and advanced technology. So far many achievements in this regard proved to be just a tip of the iceberg but 2020 is expected to be a fruitful year to witness real enhancements in this field. AML practices are required by businesses across the globe to perform customer due diligence.  It is not an uphill task as it may seem. It is an investment of a few thousand dollars to demit the loss of millions. 

AML Regulations for Businesses

Anti-money laundering (AML) screening has been employed by financial institutions to detect suspicious transactions and analyzing customer data. AML is to filter customer data, classify it according to the level of suspicion and inspect it for errors like any sudden and substantial increase in funds or a large withdrawal or many others. AML screening is used to detect money laundering, terrorist financing, and tax evasion, etc. The businesses are required to conduct proper AML due diligence to comply with AML regulations. Global organizations need to keep check and balance and devise a proper AML program. Relevant customer data is screened through official and non-official high-risk watch lists to identify potential risk customers. Moreover, businesses must have the legal documents of their distributors and resellers to verify that they are complying with global AML regulations.

6 Trends in AML to Watch out for

According to the European Banking Authority(EBA), AML is the top priority for the EU in 2020 as money laundering and terrorist financing are the main threatening risks. To address the issue EBA will form a new committee to ensure a collaborative approach towards the problem by working on a superimposable implementation of different policies. The aim is to investigate the breaches of AML regulations and take necessary actions. Following are some trends of AML to watch in 2020:

Get ready for more information on Ultimate Beneficial Owners

The many creative ways criminals use shell companies and offshore structures to hide their laundered money have become public knowledge after Panama Paper leaks. To counter this, this year we expect ultimate beneficial ownership legislation to become a vital feature of the financial crime landscape. Global focus on UBO transparency will ramp up this year as a consequence of many legislative actions from last year. Steps are taken in the UK to introduce the ultimate beneficial ownership register for businesses by the end of this year and we are expecting to see further progress in all these jurisdictions. 

Regulatory Regimes get an Overhaul

In 2019 money laundering scandals were never far from the headlines. For instance, the Danske Bank scandal which exposed the threatening level of suspects that flowed unchecked through European banks in past years. This year European authorities will be less lenient and more assertive with enforcement when dealing with financial crimes. As the UK is committed to being a leader in fighting financial crimes and delivering effective financial regulations, this year the enactment of sanction and AML bill will give the UK the power to introduce its own AML legislation bill. Except for the UK, the US will maintain its regulatory financial footing by introducing new Fintech regulation. 

Standard AML rules for Crypto-businesses

As global cryptocurrency adoption continues, 2020 will be the year that such organizations get serious about AML compliance. Crypto poses AML risks for years and authorities have wrestled a lot for it. Now is the time that exchanges and mining will take a considered approach allowing for trade and investment under tight restrictions. The uneven landscape of cryptocurrency has prompted the development of the global regulatory framework.  The EU’s Fifth Anti-Money Laundering Directive AMLD5, implemented on 10 January 2020, will blow AML obligations for cryptocurrency exchanges which are to be compiled this year. All this enlightens that influencing big moves are expected in the global regulation of cryptocurrencies to prompt the industry to adopt new monitoring tools. So such exchanges will have to adhere to AML compliance this year as there is no other way. 

FinTech drives Demand for Automated AML

In 2020, a large number of firms will move to automated AML checks to scale faster in this increasing consumer adoption and subsequent transaction volume in this competitive FinTech climate. Manual AML generates a  massive amount of false positives which makes it difficult to onboard customers and process payments. Among so many false alarms there are high chances of missing the actual money launderers. So businesses are adopting digital solutions for AML and KYC to check who they are dealing with. This automation takes less time and is cost-effective. 

6AMLD is in the Next Big Change

Another AML directive by the EU is in the pipeline this year. This time the EU is keeping up with changing the international regime and targeting for uniform AML and CFT practices across the member countries. The new directives are to be integrated into national laws of member states by December 2020 and the reporting entities are required to fully implement the laws by June 2021. This new directive is well-drafted to close any loopholes left in AML and CFT regulations previously.

Enhanced Transaction Monitoring Solutions

This year, financial regulators will place an increased focus on the monitoring of AML risks which will include a push for businesses to adopt proper transaction monitoring processes. Regulators will expect businesses to have an effective system in place to monitor transactions. NYDFS Part 504 legislation will drive this requirement as a general move towards controls measured by the quality of outcomes. To help financial institutes configure a range of monitoring scenarios and analyze data more efficiently genuine suspicious activities need to be separated from false positives. In this regard, the availability of new transaction monitoring software platforms will become essential in 2020. Firms will gain a competitive advantage if they identify suspicious behavior patterns while cutting operational workloads.

Why online alcohol industry needs robust age verification solutions?

Why online alcohol industry needs robust age verification solutions?

“Can I see some ID?” The question brick and mortar booze stores ask or at least should ask to verify that the buyer is of legal age. These ID check laws are stringent in almost every jurisdiction. For instance, selling age-restricted products to minors is a punishable crime with a penalty of up to 20,000 pounds, as well as, causing significant reputational damage to the owner. Retailers responded by placing age verification checks at checkout.

However, with increasing sales and purchases happening over the internet, how these strict age checks should be carried out? This is becoming a challenging obstacle for online retailers of liquor products. It’s quite obvious that regulations apply to the sale of liquor both online and offline. But the problem for online retailers is arguably greater as the customers could hide their identity behind the anonymity that internet offers.

Even though there has been a considerable growth of age checking in the offline environment, which has contributed to a notable restriction in the illegal and underage sales of alcohol, it is becoming clear that online alcohol sales are a potential area of vulnerability for the retail sector. The dilemma is that most of these online sellers didn’t implant verification checks. Some of the major retailers do have some safeguarding restraints but the digital world is enormous and borderless. The current checks aren’t enough and more needs to be done by all retailers to ensure that underage alcohol sale is restricted. 

What should the retailers do?

Online retailers need to make sure that they are not selling age-restricted products to the people under minimum legal age. The minimum age requirements are different in every jurisdiction, however, the online retailers should follow the most widely used minimum age requirement all over the world. 

This means the retailers should set up effective age verification systems capable of identifying and verifying the age of customers to ensure they are above the legal age to purchase alcohol. When accessing which systems or checks could be more suitable, businesses should consider all legal requirements and exercise due diligence to avoid committing an offence. These legal requirements are not only a retailer’s defence in consumer protection regulations but they are also an ethical duty of the retailer. 

These systems should be regularly observed and updated to identify any issues or to keep pace with the advancement in technology. Ordinarily speaking, there is no definite answer to what constitutes taking all feasible anticipations and exercise all due diligence possible. 

Conventional age authentication checks unlikely to satisfy due diligence

Many online retail stores place simple checks and transfer the responsibility of verification to their customers. The simple age confirmation checkboxes are the most common type of restraints set up on the websites. Here are some of the checks that are, unfortunately, not enough to verify the age of purchasers.

  • Relying on the customers to confirm their age
  • Using simple disclaimers to make an assumption
  • Using an accept statement for the users to confirm that they have read all the terms and conditions and are eligible to purchase their product.
  • Accepting payments through credit card without verification that the card belongs to the person making purchases.
  • Placing tick boxes to ask customers to confirm that they are of legal age

More convincing age verification checks

Age verification in the rapid pace digital world is a challenging and cumbersome task for both customers and businesses alike. Here are some of the possible precautions that retailers could implement to comply with age verification regulations. 

Age verification on delivery

One simple age verification check could be that retailers rely on delivery drivers to request the age proof at the time of delivery. However, relying on the third party courier delivery services may not be a proper way as the third party could deny the responsibility for age verification.

Collect in-store policy

Another scenario where businesses could perform stringent age verification is by introducing the collect in-store policy. This strategy may work for some of the retailers having both online and street presence but for businesses offering products online only this strategy will not work.

Online age verification services

In this tech-savvy environment, online age verification solutions have become more convenient. With these solutions in place, businesses can now implement multiple layers of checks to verify the age of the customer. 

Online age verification is a secure way to verify and validate the age of customers making purchases online. Using government-issued identity documents to verify the age of customers, both businesses and customers can help build a safer online market place for age-restricted products such as alcohol. By using AI-based identity verification solutions, businesses can verify the identity of a user more securely and in real-time without extra delays. This not only serves as a stringent verification check but also enhances the customer experience. Without interrupting the customer journey businesses could comply with all regulatory requirements around age-restricted products.

With increasing legal and ethical implications, it is necessary for businesses to employ a more technologically advanced age verification solution that serves multiple purposes at the same time. AI-based online identity verification solutions could help online alcohol retailers to restrict under-age users in real-time without creating obstacles for legitimate customers.  

Biometric Identification revolutionizing the world in 2020

Biometric Identification revolutionizing the world in 2020

Every day we come face to face with new technology innovations that leave us awestruck. From the past few years, the world is witnessing technology change that is not only impacting the industries but also defining the new lines about how we communicate and interact with each other. One such technology bringing revolution is biometric technology. Biometrics is defined as the unique and intrinsic physical and biological characteristics of a person that verifies their identity.

The history of biometrics 

The concept of biometrics has been there for centuries, the only difference is in the advancement in their use. Back in the 19th century, Bertillon was the first one to use specific anatomical characteristics for the identification of reoffending criminals. This technique has proved to be quite successful for years, however, it was not much reliable that soon turned it into a thing of past.

Afterward, this budding use technology was reacquired by a British officer, William James, who was put in charge of road construction in Bengal. He made his subcontractors sign the contract through fingerprints –  the early and most common form of biometric authentication. This fueled up the use of biometrics in different industries and countries. In 1901, the UK Metropolitan Police started the use of biometric identification.

In 1902, the New York police and French police also followed their suit. Later in 1924, the FBI adopted biometrics for identification. Apart from fingerprints, the concept of behavioral biometrics – a measurement of unique patterns – isn’t new either. For instance, back in 1860s telegraph operators recognized each other through Morse code which means the distinguished pattern they would send dot and dash signals. 

Trends in Biometric Identification

Identifying individuals based on their unique physical, biological and behavioral characteristics is the fundamental principle of biometrics. The use of biometrics is rapidly growing especially in terms of security and customer experience. Every industry is now incorporating biometric technology for the successful growth of the business. Biometrics first started as fingerprint recognition which is still considered the most common and extensively adopted biometric identification method.

At first, fingerprint scanning was associated with the voting system but now for a few years, it has been promptly used by the organizations as user authentication systems. From offices to schools, the institutions use fingerprints for marking attendance and allowing access to authorized people only after identity authentication. This is just one use case, multiple others are already exploring business operation through biometrics. In 2013, when the iPhone introduced a fingerprint scanner, people found this feature a thing from the future and hence it gained popularity among other brands. 

Fast forward, fingerprint scanning isn’t the only form of biometric identification. In 2018, with the launch of ‘FaceID’ in iPhone X, using facial recognition technology, biometric authentication seems like a mandatory requirement of smartphones. This highlights the increasing trend of biometric identification and verification. The race isn’t about differentiating between different types of biometrics but to focus on the biometric adoption for better security and customer experience. 

As per the study by Spiceworks, 90% of businesses will be using biometrics by 2020. 

Biometrics and Identity –  Who you are?

Biometric identification is a fastly-growing phenomenon, particularly in the identity verification market. From a general perspective, biometrics are often combined with other technologies to gain competitive advantage, for instance, AI-powered biometric verification systems to confirm the user identity and facilitating organizations in curbing fraud and making the business secure and free of imposters.

The identity of an individual has been verified using three common factors that include

  1. Something you know, like a username and password, pin codes or some secret information.
  2. Something you have, for instance, a bike belongs to one who has its keys. In terms of technology, we can say a verification code or a one-time password.
  3. Something you are, means unique characteristics – a face, fingerprint, voice, iris, etc.  – of an individual.

From these three authentication ways, the first two are not secure and reliable. The reason is the technological advancements through which cybercriminals and fraudsters are finding ways to access and steal user credentials; for instance, phishing, social engineering, and brute force attacks. If the identification data is compromised, then how to ensure that the person on the other end is an authorized person, not some imposter.

However, in the case of biometrics, they can’t be stolen, forgotten, exchanged or forged that makes them accurate and secure to verify the identity of individuals. The biometric identification methods are evolving with time. The ‘old school’ identification and authentication methods are being replaced with voice recognition, retina scans, facial recognition, and fingerprint identifications.

Every method of biometric identification is unique and reliable depending on the utilization of emerging technologies. It won’t be an understatement to say that individual identification through biometrics is progressing at a commendable rate and soon can become a global standard.

Major use cases of Biometric identification

Biometric systems use physical characteristics to verify the identity of individuals. And these characteristics can be in any form from fingerprints to face biometrics. These biometric systems are being employed by multiple organizations across the globe. Initially, it was meant to facilitate law enforcement and government agencies such as the FBI and CIA to identify criminals and threats to national security. 

The digitization of the world is driving businesses to integrate biometric systems to survive the competition layer. Here are some significant use cases of biometric identification and verification.

Biometric Access Controls

Biometric access control systems are effective in keeping imposters and unauthorized individuals at a bay by preventing them from accessing a system, networks or some facilities through biometric authentication. In the world of technology, logical access control is accounted as a corresponding factor for user authentication. Moreover, these systems facilitate organizations in meeting ‘identity and access management’ policies.

Contrary to passwords, pin codes, and access cards that can be stolen, forgotten or compromised, biometric authentication is secure and reliable since it’s base on who you are instead of something you know or possess. Similar to the mobile industry, other companies have started using fingerprint scanning and facial recognition in their authentication systems.

An integral part of KYC

Know Your Customer (KYC) check is one of the obligations imposed on every business dealing with money whether a bank, money exchange or e-commerce. As per the KYC regulation, companies need to verify and authenticate the customer’s identity during the onboarding process and for conducting customer due diligence. This is a fundamental for combatting digital fraud, identity theft, financial crimes, and money laundering.

Integrating biometric identification checks, organizations can streamline the KYC process making it faster and more efficient. Moreover, the automated verification through biometrics makes the onboarding process frictionless hence, improving customer experience.

Multi-modal biometrics for security

Biometric technology comes with a wide range of practices and techniques that can easily penetrate into different domains including state security, identity verification, and customer convenience and experience. Multimodal biometrics are generally used in forensic identification and identity management sectors. The multimodal biometric systems combine various biometric sources such as fingerprints, iris, and face, for more accurate identification minimizing false positives and increasing security and customer convenience.

The way forward

Biometric adoption is on the rise; as per Global Market Insights, the global biometric market is expected to grow up to $50 billion by 2024. This figure provides a significant insight into the impact of biometrics on the industries. In the near future, to say biometric identification is going to be a global standard for customer verification won’t be wrong.

AI face recognition for total automation

AI face recognition for total automation

Face recognition is everywhere but still we’re unable to say goodbye to document, maybe because we’re still far away from total automation that we wish to achieve with this technology. 

A research stated that the global facial recognition market is expected to grow at Cumulative Annual Growth Rate (CAGR) of 16.6% reaching a record-high value of USD 7.0 billion by 2024. This growth is quite justified as we see face recognition everywhere in our day to day life. 

Nations such as U.S., U.K, EU, China, etc are leading the convoy of these technological advancements where one’s face will replace the identity documents. Face verification solutions are used everywhere, from our mobile phones, and Facebook, to crime control agencies and airports. But this awesome technology has unique limitations and benefits for different industries where it’s used, that will be explored in this blog. 

Let’s explore some use-cases of face recognition. 

Travel is becoming document-free

An increasing amount of airports are using face verification solutions to verify the identity of their passengers. As airports are commonly used for huge crimes such as human trafficking, money laundering, and drug trafficking. The documents are losing their touch which leads the airports to use advanced technologies for passenger screening. Passenger security and their travel experience are equally significant and face verification satisfies both these requirements. Accuracy rate as high as 98.67% is achieved with facial recognition and results are delivered within 15-60 seconds.  It enhances customer experience, reducing the time consumed for security processes. 

Given these valuable benefits of face recognition technology, it’s predicted that 97% of airports will roll out this technology by 2023. But this is not the end of the story, because the airports are lacking in using this technology throughout the passenger flow in the airports. Maybe because they lack resources that Hartfield-Jackson Airport holds. This airport in Atlanta uses a multi-faceted facial recognition system that scans the passengers to verify their identities at various check-points in the airport. This airport provides an ultra-modern view of what the future holds for the travel industry. 

Businesses utilizing facial recognition

Businesses are always in a bid to deliver the best to their customers, especially the ones that operate in totally private sectors, with no government players. Industries such as e-commerce, Fintech, Regtech, identity verification, and blockchain are trending as they’re carving the future of how businesses will be conducted in the future. 

These industries are the primary users of next-generation technologies due to nature of their products and services. The identity verification industry uses it in customer due diligence and identity screening solutions. These solutions use face verification along with document screening to ensure fool-proof security and seamless consumer onboarding. Fintech and blockchain ventures are using the solutions of the identity verification industry to onboard their remote customers without any false positives. 

Other than that, some tech giants such as Google, Facebook and Amazon are also using in-house face recognition systems. Mobile phone producers are also using face recognition to give a better experience to their consumers. All these unconventional use-cases of this technology have made it a household term. 

Face recognition for crime control

Crime control authorities are always in a bid to bridge the loopholes in social infrastructure which may lead to criminal activities. FBI uses facial recognition to identify the suspects, and if a match is found in the database of criminals, it can be used as the proof l to pursue a lawsuit against him. 

Also, the police department in some states of the U.S uses face recognition technology to identify the criminals in the recordings of public cameras. The police departments are still working on this initiative as the social activists have found privacy related loopholes in it. 

What are the hurdles in the growth of face recognition technology

Regulatory authorities have not given a free hand to the entities in using this technology. There are some restrictions on the use of public data. 

The Anti-surveillance ordinance signed by San Francisco’s Board of Supervisors banned the city agencies to use face recognition technology in 2019. Other states that ban the use of surveillance camera recordings to find the suspect are Somerville, Oakland, and San Diego. 

The best solution to overcome these hurdles is to use the technology with care and to handle the customer data with care. 

Customer data and privacy is the primary concern of the regulatory authorities hence the reason the laws such as GDPR and CCPA are introduced to control the use of customer data by the private sector. 

So far the private sector is the one that is least affected by the hurdles in the use of facial biometrics, compliance with data protection regulations and cautious usage of customer data will lead to the projected growth of the facial recognition industry. 

To wrap up, businesses from every corner of the world are onboarding remote customers and initiating business relations with global business entities. Face recognition solution enables them to onboard customers and to allow secure login to them in the future. As the businesses have a bigger and clear field to play, fully utilizing the potential of this technology controlled with data protection practices will lead to retainable growth. As for the public sector and government agencies, the future is bright one they have developed reliable in-house solutions.

KYC in Crypto Exchanges - Hitting the Nail on the Head

KYC in Crypto Exchanges – Hitting the Nail on the Head

A few years back, startups related to ICOs (Initial Coin Offerings) were in full swing, driving the cryptocurrency businesses and making their own set of regulations. However, it is not the same case now. The financial revolution in the form of virtual currency has introduced several challenges that require a standardized structure of rules in place. The regulatory scrutiny and evaluations resulted that anonymity in crypto businesses is the root of diverse financial crimes.  

After the analysis of the complex crypto environment and working, regulatory bodies around the world declared that the exchanges promoting decentralized platforms are prone to several threats. The intimidating factors in crypto businesses refer to financial crimes such as money laundering, terrorist financing, crypto gambling, and other criminal activities. The reason is an open invitation for bad actors who enter legitimate systems and perform malevolent activities.

The concern of regulatory authorities is that the crypto exchange businesses lack identity verification measures that facilitate the bad actors in the system. Therefore, due diligence measures such as Know Your Customer (KYC), Anti-money Laundering (AML), and Combatting the Financing of Terrorism (CFT) need to be ensured by crypto businesses. These measures identify the investors before allowing them to engage in the token sale. Therefore, improve the security of the account/wallet in crypto exchanges and discard illicit transactions immediately. 

The dawn of KYC in crypto exchanges

In no time, virtual currency exchanges have laid strong foundations globally. The digital assets providers are not regulated accordingly as per the requirements of regulatory bodies. However, the reputable crypto exchange platforms are moving ahead to prepare themselves towards the consideration of regulations that could help them filter out the bad actors that opt to participate. Gemini is a New York-based prime exchange that is fully regulated and always takes into account the regulatory compliance and their obligations. There are some other exchanges such as Coinbase, itBit, Kraken, Liquid, butFlyer, Bitstamp, OKCoin, and many others that require stringent identity verification measures that could facilitate only honest identities through crypto exchanges. 

The need for KYC compliance emerged as a result of money laundering and terrorist financing using virtual assets and currencies. The financial regulators noticed that the consumers face financial loss in crypto exchanges and has paved the road for money launderers and other financial criminals to perform illicit transactions across the world without using their real identity. In this way, encapsulating the dirty money gets easy for money launderers in the crypto environment where they are anonymous. Therefore, regulatory scrutiny declares identity verification mandatory for crypto businesses with which investors will be verified beforehand.

The approach of crypto exchanges towards KYC, AML & CFT compliance

The anonymity in cryptocurrency exchanges demands identity verification as well as transaction monitoring throughout the customer lifecycle. Just like all other financial institutions, virtual currency providers need to monitor the ongoing transactions closely to enhance observance in financial systems and immediately take action against suspicious transactions. As in cryptocurrency, transactions are almost untraceable which is a loophole in this system to which most of the fraudsters take advantage. Identifying this, global and local regulatory bodies across the world came up with the regulations that could help reduce financial crimes by allowing only honest identities to participate in the system. 

The whole KYC process is divided into the following levels:

  • The first is, Customer Acceptance Policy (CAP) in which the exchange determines documents of identity and enlist the detailed related to it.
  • In the second level, the Customer Identification Program is conducted in which the Customer Identifiable Information (PII) is collected and identity is verified against it. 
  • The collected information of the potential customer is then verified as per CAP. 
  • A risk management approach should be taken in which continuous monitoring of transactions should be done to identify if the system contains suspicious transactions.

Risk management in Fiat-to-crypto and crypto-to-crypto exchanges

For identity verification, the collected information is examined and verified. The information refers to the personal details of investor who opts to invest in crypto business. The identity authentication is performed that covers the KYC as well as AML procedures. In the whole process, details are identified and AML screening is performed against updated global watchlists, sanction lists, and Politically Exposed Persons (PEPs) records. These are risk assessment practices whose compliance is important for crypto businesses to deter the risk of fraud in the system.

Crypto exchanges are divided into two main groups; fiat-to-crypto exchanges and crypto-to-crypto exchanges. In fiat-to-crypto exchanges, fiat money enters the market of cryptocurrency. These exchanges allow investors to exchange fiat currency such as dollars for the bitcoins, ether, libra or some other supported cryptocurrency. Whereas, in crypto-to-crypto exchanges, one cryptocurrency is exchanged with another one. In both these types of crypto exchanges, due diligence needs to be ensured to make sure no entity is using the crypto platform a medium to launder money, finance the act of terrorism, perform gambling or any other criminal activity. 

Crypto regulations are going to stay

Financial services providers including cryptocurrency exchanges are vigilant with respect to financial services they provide to the customers by ensuring a secure platform. Regulating crypto assets is under the agendas of crypto businesses. Crypto investors have faced substantial monetary loss as a result of exchange scams and hacks that ultimately plague the crypto market. With the plan of preventing the future crypto investors from loss, regulators across the world have declared KYC, AML and CFT regulations mandatory for virtual currency providers. For instance, in AMLD5 (Fifth Anti-money laundering Directive), identity verification in virtual currency businesses has declared mandatory to combat the actions of money laundering and terrorist financing. 

Now before the next regulatory evaluation, crypto businesses have to come up with KYC identity verification strategies to ensure accountability and transparency in the digital currency system. Any discrepancy with respect to non-compliance can result in harsh fines and penalties by regulators. 

5 Ways How AI Is Uprooting Recruitment Industry

5 Ways How AI Is Uprooting Recruitment Industry

Artificial Intelligence is strengthening its position in many industries and the recruitment industry is one of them. The AI-based platform is used to optimize recruitment processes for many industries. Through machine learning and problem-solving

AI helps find companies the best resource. The ability of AI to provide effective results in less time is the reason for its massive use in the recruitment industry. The battle to attract and retain talent is gaining a grip in recent years. 

Today’s candidates are more selective and gravitating towards companies having a compelling mission statement and instead of focusing monetary gains they have positive impacts. The recruitment industry is feeling the crunch to enhance their game by deploying AI. To enhance recruiting efforts, artificial intelligence technology has become an essential prerequisite.  AI- solutions are used to make it less hit or miss by recruiters in hunt of talent and help speed up the process. 

Will AI replace human recruiters?

With rapid strides in technology has made humans think that artificial intelligence is harmful to humans as it will take away their jobs.  Many industries, especially recruitment, might wonder if AI will replace human recruiters. While AI can be a lot more efficient in sorting out candidates based on criteria set by the potential employer and data available but it is almost unlikely that AI will replace human recruiters. Human touch is always a necessary component of the recruitment process. AI is more like a labor-saving aid rather than something that will completely take over human activities. 

AI Setting a Sight in Recruitment Industry:

Here are some benefits that AI provides to lighten the load of recruiters and do better talent hunt in the recruitment industry:

1- Unbiased Decision Making

The recruiting process has traditionally been laden with bias. Human biases can be a major factor to hinder the right recruitment process leading to inefficient and unproductive hiring. Recruitment analytics solutions clubbed with AI can be used for an enhanced and quick process by extracting useful information from the resume and saving in relevant data fields. Such screening helps companies find the right fit based on skills and qualifications without being biased towards any race, gender, faith or nationality. 

As the environment builds through fair and accurate hiring, resulting in more productivity and workflow of the company so recruiters benefit from it. According to a report, 56% of candidates believe that AI may be less biased than human recruiters and 49% believe that AI can improve their chances of getting hired.

2- Effective Data Analytics

A data-driven recruitment process is needed with the abundance of data we have in this word. AI-powered accurate data analytics are used to evaluate candidates on the basis of their performance. Predictive Analytics suggests a candidate’s job changing behavior which helps a recruiter in excluding unreliable sources and by optimizing the hiring process. By targeting candidates on different platforms, data-driven recruitment processes help in improving the quality of the hiring process. Data-driven recruiting not only assists in improving the quality of hire but includes better allocation of funds for recruitment. Such as targeting candidates using Social media, etc.

3- Facial Recognition Technology

Video interviews are conducted for remote and non-remote candidates. So facial recognition technology can be used for a number of reasons in the recruitment process. This saves a lot of time for recruiters and provides a great way to get to know the candidates. The candidate’s facial expressions are recorded and analyzed by integrating AI in the video interview process. This helps to subsequently show their mood and assess their personality traits. This technology also fulfills the sole purpose of recognizing a candidate to authenticate the candidate is who he says he is. 

4- Automated Candidate Finding

The most crucial thing in recruitment is to find the best fit or perfect match with relevant skills and talents. This is done by developing a pipeline and sourcing potential candidates. Sourcing potential candidates out of the many is a challenging and daunting task. This can now be done using AI by automating the sourcing process and extending their reach simultaneously. In order to screen the perfect candidates, AI solutions have the ability to analyze more than 300 million social media profiles in a small amount of time. Another example of automation is the use of sending personalized messages to candidates in pipelines to keep them engaged and up to date. 

5- Hiring Remote Workers

Hiring remote workers come with their own set of challenges. The idea of hiring remote workers by businesses is getting a lot of fame and traction. According to research, around 5% of all workers in each state in the US work remotely. The difficulties and challenges are reduced by deploying AI for this purpose. A number of AI-powered tools are available to keep track of the remote hired workers and to check their productivity. The uses of various pre-employment assessment tools are remarkably useful to assess a candidate’s personality, skills, and organizational fit  As the remote workers can be physically present in the office. Moreover, by employing a digital document verification into the system the documents submitted by the candidate can be authenticated. 

AI can be used to vet candidates to know if they are trustable. The purpose is to help identify potential threats when hiring someone to work remotely. These tools help to assess potential employees’ honesty and ethics to whether they would be a good resource for the organization. Such technologies help companies to distribute their workforce more widely.  This will probably prove invaluable for service companies like Uber, Cream, Lyft, etc.

AI has limits – Recruiters Should Recognize

AI can analyze data to help recruiters but it cannot take their position. The human brain is always required to recognize real talent. AI is poised to give staffing and recruiting professionals more time to do the task that requires human decision-making instead of replacing jobs in recruiting. Following are the limits of AI:

  • AI is fast and accurate but not error-free.
  • AI makes connections from data but does not define causes so the human brain is required to decipher the meaning behind the correlation.
  • AI follows defined sets of orders for harnessing large sets of data but it will not be able to see the bigger picture.
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