5 Key Cybersecurity Threats for 2020

5 Key Cybersecurity Threats for 2020

Cybersecurity threats have become remarkably common and they continue to gain traction with the progressions in technology. Cybercriminals are continuously adopting newer technologies, enhancing their coordination and becoming more sophisticated. Through cybercrimes, employees’ and customers’ personally identifiable information (PII) gets compromised and used in illegal schemes somewhere else. Through large-scale data breaches, legitimate data is vulnerable to identity thefts and frauds. 

According to a study by Cybersecurity Ventures, cybercrimes will cost the world $6 trillion a year by 2021.  In the last few years, cybercrimes have been in the news a lot with tech giants like Google, Facebook, Twitter, and mobile companies becoming a victim of data and security breaches. This is why when it comes to cybercrimes, it’s not a question of ‘if’, it’s a question of ‘when’ it will happen. 

Watch Out for These Cyber Security Threats in 2020

This article details five key cyber threats that enterprises need to take seriously and should watch out for in 2020. 

Social Engineering Attacks 

Social engineering is a method of tricking people so that they give you their information. It is also a way to exploit their weakness, or negligence, to figure out that information. Phishing attacks are a type of social engineering attack. In a phishing attack, the attacker generates a fraudulent email, text or website in order to dupe a victim into giving out sensitive information. Phishing attacks are considered to be the most frequently used approach to get into a corporation’s network these days. Through these attacks, login credentials for work, passwords to online accounts, credit card info, date of birth, etc. are stolen by the attacker. 

Only 3 percent of malware tries to exploit an exclusively technical flaw and the other 97 percent target users through social engineering according to KnowBe4. Phishing strategies are now becoming remarkably common as they are cheap, effective and easy to pull off. A report by Small Business Trends reports 1 in every 99 emails is a phishing attack. And this counts for 4.8 emails per employee in a five-day work week. Close to 30% of phishing emails make it past default security. 

Social engineering attacks are specifically designed to deceive your employees into granting access to systems or divulging information that helps attackers gain that access through low-, or often no-tech means. Social engineering attacks can come in many forms — by phone, email, snail mail, in person or through social media. So, it’s important that you train your employees to be wary.

IoT-Based Attacks

Almost everything these days is connected with the internet but a lot of these smart devices don’t have strong security installed. This makes it easy for attackers to hijack these devices to infiltrate business networks. An IoT attack is any cyberattack that leverages a victim’s use of internet-connected smart devices like Wi-Fi-connected speakers, appliances, alarm clocks, etc to sneak malware onto a network. In the workplace, everything from smart thermostats and videoconferencing technologies to stock monitors and smart vending machines are all examples of IoT technologies. 

IoT is continuously gaining traction and according to Gartner, by 2020 more than 20.4 billion IoT devices will exist. Connected devices are easier for customer use and the majority of businesses use them to save money. More connected devices imply greater risk which subsequently makes IoT networks more vulnerable to cyber invasions.  Once controlled by hackers, IoT devices can then used to overload networks, create havoc or close down essential equipment for financial gain. The very things that make IoT so common and easy to use are the same reasons for their vulnerability. 

Ransomware Attacks 

Ransomware attacks are becoming extremely common in the past few years. These are a type of malicious software designed to block access to a computer system until a specific sum of money is paid. This type of attack is triggered by an employee clicking on a link in a phishing email that is harmful and then clicking the link that ignites the malware. 

It is highly imperative for enterprises to maintain the privacy of their customers and keep their confidential data secure. In general, ransomware attacks targeting individuals are on the decline over the last year. As reported by ITPro Today, within businesses the rate of ransomware detections rose from 2.8 million in the first quarter of 2018 to 9.5 million in the first quarter of 2019. That’s nearly a 340% increase in detections. It is already on track to hit $11.5 billion in damages for 2019. 

A reason why businesses are the victims of ransomware attacks more than private individuals is that they have more motivation to pay for ransoms compared to people. The threat of ransomware is ever increasing and it’s going to be no different in 2020. Businesses are vulnerable to encryption malware making its way into their systems and destroying their data.

Internal Threats

One of the most damaging cybersecurity threats faced by any business is through its own employees. As employees have inside access to the business’s happening, it makes them capable of inflicting great harm if they choose to abuse their access rights for personal gains. Employees may unknowingly allow their user accounts to be jeopardized by attackers or download harmful malware onto their systems. 

The reason why internal threats are one of the biggest cybersecurity threats to pay attention to is because of the magnitude of risks they pose. Internal security breaches happen about 2500 times every day in US Business and 19% of employees state that they have been involved in a security breach at work.

State-sponsored Attacks 

It isn’t just hackers looking to make a profit through attacks and cyber threats, cyberattacks are becoming common on the government level as well. Entire nations are using their cyber skills to infiltrate other governments in order to perform attacks on critical infrastructure. State-sponsored attacks will continue to expand its scope in the year 2020 with attacks on critical infrastructure as a particular concern. 

The majority of these attacks target government-run systems and infrastructure but private sector organizations are also at risk. According to a report from Thomson Reuters Labs, state-sponsored cyberattacks are constantly emerging and pose a significant risk to private enterprises. This will increase the challenges to those sectors of the business world that provide convenient targets for settling geopolitical grievances.

5 Technology Trends To Disrupt Banking in 2020

5 Technology Trends To Disrupt Banking in 2020

Living in the digital era, technology is driving major changes in almost every industry. Whether it’s about introducing automation for improved business operations, enhanced cybersecurity for data protection, cloud computing for instant collaboration, data analysis for insights extraction, or personalized customer experience, technology is becoming an integral part of businesses.

The banking industry is no more of an exception. In fact, it is the most technology-driven industry in the world. Considering the rising trend of technology, more than 81% of banking CEOs are already in favor of the digitization in financial institutes – as reported by PwC study. To strive for the world of immense competition, financial institutions are proactively adopting the latest technology trends which include, but not limited to, artificial intelligence (AI), chatbots, blockchain, big data, etc.

While the businesses are competing to attract maximum customers, the only competitive edge is to keep track of the latest trends in the market and implementing them in your business in the most effective and useful way. 

Here are some of the latest technology trends all set to disrupt the banking sector in upcoming years.

Artificial Intelligence

Artificial intelligence has been there for a few years now and is gradually taking over the industries. The majority of the professionals and decision-makers in financial institutes are investing in artificial intelligence as reported by PricewaterhouseCooper study. Executives and business professionals are well aware of the business advantages that AI is bringing.

The significant potential of artificial intelligence for the industry is the cost savings in business operations. As per the Business Insider Report, the cost savings in the banking sector due to the smart use of AI are expected to be $447 billion by 2023.

The financial institutes are introducing artificial intelligence technology to save costs in their three-tiered business structure, i.e. front office, middle office, and back office. The fruitful applications of AI across these bank’s offices are offering extensive cost-saving opportunities for the institutions.

The following AI use cases across the main channels of banks are enhancing the operations and providing recommendations for the financial institutes that how they can implement AI-enabled digital transformations in their organization.

Front Office (Conversational Banking)

By leveraging AI technology on the frontend, banks will continue to enhance customer identification and authentication processes seamlessly, build strong relationships with customers by providing personalized insights and recommendations. Moreover, by introducing voice assistants and chatbots, the financial institutes are able to mimic live employees, handling customer queries 24/7.

Middle Office (Anti-fraud)

With the increasing trend of the digital frauds and stringent compliance requirements by the regulatory authorities, banks are being forced to incorporate the most advanced AI technology to meet the KYC/KYB and AML compliance. In middle-office functions, AI is facilitating banks to improve their anti-money laundering (AML) and know your customer (KYC) checks to prevent payment frauds and financial crimes.

Back Office (Underwriting)

Banks have started incorporating AI solutions to improve their underwriting decisions by utilizing multiple factors that provide better transparency about the borrowers than traditional underwriting systems. It helps the institutes to assess the consumers that are considered “at-risk”.

These AI-enabled transformations exercised by banks may seem much advanced but they are revealing how to capture the opportunity efficiently. Understanding the need for a holistic AI strategy, some organizations – including Citi, JPMorgan Chase, HSBC, and U.S. Bank – are already employing AI.

Chatbots

The explosion of the internet is making processes quick and reliable by providing customers opportunities to get their work done remotely. Henceforth, in the customer-driven market, they don’t wait long to get their queries resolved and demand fast and adequate services to resolve their issues.

The invention of AI-based Chatbots has paved new roads for banks by making conversational banking more convenient and automated. Many financial institutions are using chatbots to meet dynamic user expectations while reducing costs. They are eliminating the use of traditional methods of two-way communication, i.e phone calls, emails, and physical visits. 

The banks, for instance, Capital One and Bank of America, are using chatbots to resolve simple customer queries. However, with the advancement in technology, bots will not only be able to answer queries but also detect fraudulent activities, offer a financial trip and assist the customers in registration processes.

Chatbots are able to provide personalized customer experience to meet their ever-changing expectations. It facilitates banks in making smart conversations with customers eradicating the need for human customer agents, saving the cost. With the right chatbot development company, banks can provide centralized financial management and improve customer service by replacing human agents. 85% of the customer service interaction is expected to be handled by Chatbots in 2020, states Gartner.

Big Data

Moving into the fourth industrial revolution, the data-driven market is overtaking the businesses. To survive the competitive market, data analysis is the key. But with a large amount of data generated every day, it is becoming nearly impossible to extract useful information and insights. To deal with it, big data is the answer.

This technology is causing significant disruption in the banking industry by collecting and putting all the banking data in one place and processing it to get valuable information to stay ahead of competitors. The collected information includes ATM withdrawals, money transfers, debit/credit card transactions, customer data, etc. 

Due to big data analytics, the banking industry is going through a major transformation. It is helping financial institutes to perform their operations in a better way. According to IDC Semiannual Big Data and Analytics Spending Guide of 2016, the investments in big data analytics totaled $20.8 billion, alone in the banking sector. It will grow in the upcoming years. Undoubtedly, big data will become a bespoke tool for banks in 2020 and beyond.

Blockchain

Blockchain technology is commonly known for cryptocurrency like Bitcoin. It efficiently keeps track of transactions in a verifiable way. The blockchain market is rapidly growing and is expected to reach an annual revenue of $20 billion by 2024. It explains the increasing demand for block technology across multiple industries and financial institutions is no different.

Blockchain will disrupt the banking sector because they are highly secure, economical and easy to operate. The adoption of this technology will rise as more financial institutions will realize how blockchain can improve the customer experience while enhancing security and reducing the cost. Due to its ease of use and transparency, blockchain will be used in banks for digital payment and currency exchange.

Blockchain technology protects the customer’s data (both personal and financial) as it acts as a decentralized database by storing all the data on multiple blockchain servers. Through blockchain, banks can eliminate the need for third parties in loan and credit processing. Moreover, blockchain makes payments more secure while reducing interest rates.

Robotic Process Automation

Businesses are dealing with voluminous data every day, which means there are high chances of human errors. Several banks, including Axis Bank and Deutsche Bank, are incorporating RPA to effectively manage business operations while reducing human errors and efforts. With the advancement in the digital world, the process turnout time is reduced from weeks to minutes and seconds, all thanks to robotic process automation.

Banks are benefitting from RPA technology, by automating their several processes. It does not only help them in minimizing errors and saving cost and human resources but also enables them to focus on customer engagement and business growth. Some of the processes include:

Know Your Customer (KYC)

Know your customer is a customer identification and verification process imposed by regulatory authorities on every financial institute. This process involves in-depth customer verification and due diligence that may require up to 1,000 Full-time equivalents (FTEs) to successfully carry out the process. Moreover, the banks spend around $384 million per year on KYC compliance.

Taking into account the resources, time and cost involved in the KYC process, banks have started incorporating digital KYC solutions – a domain of RPA. Through eKYC, financial institutes can fulfill the KYC checks in real-time, hence, improving customer experience. 

Meeting Compliance

The rise in digital frauds, money laundering, and terrorist funding incidents, the compliance rules are becoming more stringent and banks are sternly obliged to comply with each of them. The applications of RPA are making it convenient for banks to comply with rules in an efficient manner.

According to Accenture’s 2016 survey, 73% of the surveyed compliance officers find RPA a key enable in compliance, in the next three years. Through RPA, productivity can be increased, henceforth improving KYC/KYB, AML, CFT compliance processes.

KYC Verification Process - 3 Steps to Know Your Customer Compliance

KYC Verification Process – 3 Steps to Know Your Customer Compliance

Introduction

In this modern era, fraudsters and criminal groups have come up with enormous resourceful ways to fulfill their malicious purposes. It is a common practice of such criminal groups to misuse the systems of legitimate entities such as banks and other financial institutions, credit unions, e-commerce, etc in order to avail free services, commit frauds and convert ill-gotten gains into ‘clean money’. However, financial institutions mostly rely on the system of controls which aimed at collecting knowledge about customers. This is also known as ‘Know Your Customer (KYC)’. 

Similarly, another major issue is that businesses are knowingly or unknowingly used for money laundering activities which at the end turn out not to be compliant with global and local AML regulations. This dirty money is then used for terrorist financing, drug-related financing, and other criminal activities. The businesses that do not comply with the obligations of regulatory authorities are subjected to harsh penalties. AML compliance is, therefore, compulsory for businesses to consider at first hand.

Proactive security measures ensures complete elimination of any sort of fraud on an immediate basis. For instance, data breaches, identity theft, account takeover frauds, and money laundering and terrorist financing. 

A large number of fraudulent activities take place as a result of unauthorized access to online platforms. To combat this, banks and online businesses are required to perform KYC for each customer during the onboarding process. It not only serves the purpose of fraud prevention but also meets the regulatory obligations of KYC compliance.

With the news of Panama Paper leaks, the global KYC regulations have become more stringent. FinCEN that is the US regulatory authority, declared amendments in regulations to combat money laundering and extended the scope of customer identity verification. These changes were proposed as a result of loopholes that were residing in the framework of financial institutions. 

KYC Verification Process Steps

Just like the way traditional banking institutions were used to verify an identity, online KYC verification is performed. KYC verification process steps include;

Collection of Information

The first step in KYC verification involves the collection of personal information from an online user. The user is supposed to enter all the personal details at the time of account registration.

Ask the user to Upload an Evidence

After collecting information, in the second step, ask the user to upload a supporting piece of evidence as an identity proof. This helps the system verify that the user-entered information is not fake and holds authentic data.

Verification of information

Once the user uploads a document as proof, the document template is identified and data is extracted from it using OCR technology. In this step, many other processes take place. For instance, the document is examined against several checks to make sure that it is not tempered or photoshopped. 

Once the authenticity of the document is proved, the information is checked. If both user-entered information and the one present on the document matches, the user is verified.

Look at the KYC Verification Process demo:

Customer Identification Program

In the KYC procedure, the Customer Identification Program (CIP) is the initial step. The identification of high-risk customers should be done beforehand to mitigate the risks. The mandate of CIP is to ensure that the entity performing a financial transaction is verified. This is necessary to curb money laundering, terrorist financing and other illegal criminal activities that disrupt the overall financial system. 

In CIP, financial institutions are supposed to collect the user information to open a bank account. This information includes;

  • Name
  • Address
  • DoB 
  • Identification number

After collecting this information, it is verified against supporting shreds of evidence that could be in the form of biometric verification or document verification. In addition to this, CIP includes risk assessment of customers and business accounts. This helps financial institutions build parameters against which each customer will be given a risk rating. KYC procedures, therefore, are predefined that contribute to the prevention of the frauds. At this point, businesses decide CDD and EDD procedures.

Customer Due Diligence

This is a process in which a customer’s information is screened against KYC protocols. In KYC compliance, this is the second step in which basic customer information is collected online in real-time. In CDD, the information collected includes;

  • Name
  • Address
  • Age
  • Date of birth

All this information is used to verify the onboarding customer. After this, the customer is assigned a rating as per credentials after the AML screening procedures and financial credibility. In case, if the customer ID is found in watchlists or PEP records, the risk is considered high and further Enhanced Due Diligence process is performed. 

CDD concludes that how much a customer profile is a risk for an institution. In private and offshore banking, CDD is supposed to be done more deeply to inspect any suspicious identities in the system. CDD should be a scalable method that could ultimately reveal the involvement of money laundering and terrorist funding in the financial system by identifying the identities. 

AML Screening

KYC compliance does not end here. One time customer verification does not conclude the inevitable credibility of that identity. Instead, a continuous identity screening should be performed in an institution to deter the risks of fraud from even the authorized entities. The ongoing financial transaction monitoring is important to identify suspicious transactions and unusual money flow in the financial system. 

For this, a risk mitigation strategy is defined that includes parameters against which monitoring needs to be performed. These indications include;

  • Transaction above the specified threshold
  • A large number of frequent transactions
  • Unusual/suspicious activities

(You can find more information about “Indications of Money Laundering” in “Guide to Anti-money Laundering and Countering of Terrorist financing”)

Corporate KYC

Know Your Business or ‘KYB’ is a process that ensures verification of corporate entities or businesses you are dealing with. This is as important as KYC compliance. Business verification includes verification of Ultimate Beneficial Owners (UBOs), third-party businesses, and other corporate entities. KYB deters the risks associated with fraudulent business entities. Not only this, as per regulatory requirements and regulations about UBOs verification, KYB has become more than necessary to build a clean customer base as well as business relationships. 

The Expected No-Deal Brexit and AML/CFT Laws in the UK

The Expected No-Deal Brexit and AML/CFT Laws in the UK

The current prime minister of the UK Mr. Boris Johnson made a statement that the UK should be ready for no-deal Brexit in 2020. In case the UK is unable to get the Brexit deal done by the end of December 2019, it’ll have to go for no-deal Brexit in January 2020. And the prime minister is all set to get the Brexit done by the end of 2019. In case the Brexit is done, December would be the transition period and the UK will get some time for getting things on the track.

Brexit – A Timeline

In June 2016, the UK voted to leave the EU and then prime minister David Cameron resigned the other day. Since the UK took the initiative of leaving the EU, it’s political infrastructure faced some significant changes including the resignation of the last two prime ministers and the delays in the Brexit day. The latest delay was of 31st October 2019. It was expected that the UK will leave the EU with the deal designed by former prime minister Theresa May but it got postponed and now it is expected to be completed in December or the UK will have to leave the EU with a no-deal. 

What is a no-deal Brexit?

A no-deal Brexit is a scenario that depicts that the EU and the UK were unable to reach a joint agreement on Brexit and the UK would leave the EU immediately without a transition period. The UK will leave the single market and the customs union and will have to follow the laws of the World Trade Organization (WTO). Also, the UK will have to introduce its new regulations for AML compliance and the country will face a major shift in its legal framework. The country will also have to form new trade agreements with neighboring EU countries and might face delays in trade due to this shift. 

No-deal Brexit will have an impact on the seamless implementation of AMLD-5. In case the UK leaves the EU without a deal it will have problems in data sharing that is to be practiced in case of implementation of the AMLD-5. 

What is a deal Brexit?

A deal Brexit is what the UK seems to be struggling for the past few years. It means the UK and the EU will agree on certain “Divorce terms” related to trade, law enforcement, data sharing, immigration, etc. 

So far it seems that the UK will be forced for a no-deal Brexit due to the approaching deadline of the end of December 2019. 

What will be the consequences of no-deal Brexit on the financial infrastructure of the UK?

Nicola Gratteri a public prosecutor in Calabria predicted that Brexit might aid the Italian mafia in pooling in their illegal money to the UK. Shell companies will be the safe haven of criminals to legitimize their cash proceeds from drug dealing, human trafficking, etc. 

AML laws and AML compliance 

The current AML laws of the UK are aligned with the EU. But in case of a no-deal Brexit or a deal Brexit, the UK will have to form its own laws. The only difference is that in case of a no-deal Brexit it’ll have to form new laws quickly as there’ll be a gap between law enforcement and this gap will be exploited by the criminals. 

The businesses in the UK and the EU will have to change their AML/KYC compliance practices as per the requirements of the new laws. The EU countries will be in a transformation period and the businesses will have to follow to cope up with the changing laws. 

AMLD-5 and its implementation

The AMLD-5 is expected to be implemented in January 2020. AMLD-5 increased the scope of AML regulations. The identity verification threshold for the prepaid cards was reduced to EUR 50, in case of remote transactions. 

The UK has always been very keen on implementing AML/KYC regulations in the country. In case the UK leaves EU with no-deal Brexit it’s AMLD-5 implementation will be affected by this shift. It’ll no more be liable for AMLD-5 compliance in its country. But it is also expected that the UK will change its Money Laundering Regulation (MLR) as per AMLD-5 regulations to practice thorough risk prevention. 

The businesses in the UK are now swinging between two scenarios, either they should prepare to follow AMLD-5 in 2020 or not.

Trade friction

Not only this but the UK will face friction in its trade and it will no more be a part of the single market and it will cause regulatory friction. As the UK will not have any transition period to settle things down unless the new laws are formed and implemented properly. 

In case the UK-leaves with a no-deal Brexit it would have the opportunity to make trade deals with other countries without long delays. In case of a deal, the scenario would be the opposite and the UK would follow the EU laws during the transition period. 

How Brexit will impact businesses in the UK and the EU?

Brexit is bound to affect the business community. It is expected that the community will face a plethora of changing regulations while continuing trade in the EU region. The businesses will have to change their AML/KYC compliance practices. In case the EU adopted the AML regulations of the EU, things might become easier for the businesses. 

The AMLD-5 implementation is also a headache for businesses these days as they are uncertain if they should follow the instructions or not. 

The uncertainty in the financial regulatory landscape of the UK is most likely to be exploited by financial criminals looking for loopholes in the regulatory framework of a country. 

How Digital AML/KYC screening will help businesses in the upcoming plethora of guidelines?

Also, the businesses dealing in the EU and the UK will face problems in aligning their AML/KYC compliance practices as per the regulatory requirements in both the regions. The digital KYC solution is designed to cater to the global AML/KYC compliance requirements of businesses. Using a global AML screening solution will help the businesses retain growth even if there is a crisis situation.

Brexit is expected to be completed in December 2019 and it is expected to change the financial landscape of the UK forever. In order to come out of this storm of changing regulations, digital KYC and AML screening solutions will be helpful.

The Definitive Guide to Anti-Money Laundering & Countering of Terrorist Financing

The Definitive Guide to Anti-Money Laundering & Countering of Terrorist Financing

In this modern globalized era, money launderers, terrorist financiers and other criminal elements came up with a slew of resourceful ways to accomplish their malicious desires. It is a common practice of these groups to misuse the services of legitimate businesses such as banks and other Financial Institutions (FIs) to convert ill-gotten gains into ‘good money’. Whereas, to counter such criminal activities, FIs rely on procedures and systems that aim at acquiring customer knowledge.

One of the major issues is that most legitimate entities turn out not to be compliant with the AML (Anti-Money Laundering) regulations. This increases the probability of bad actors to finance terrorists and drug dealers. Any legal entity that knowingly or unknowingly became part of money laundering or terrorist financing will suffer from enormous regulatory penalties. Therefore, it is crucially important for FIs to establish a strong internal system of controls that, even when criminals are using the best effort and abilities to elude the rules. It allows them to identify fraudulent entities and unusual money flows. 

When an entity makes substantial profits, it finds ways to use or save funds without moving the attention of inspectors on underlying suspicious activity or on criminal entities that are doing so. In money laundering, criminals disguise their sources of money, change the form or transfer it to a place that seems less likely to grab attention. Embezzle funds are converted into good money to ‘enjoy it’. 

Palermo Convention or United Nations Conventions Against Transactional Organized Crime states money-laundering as:

“The conversion or transfer of property intentionally knowing that it is a proceed of crime, to conceal the illicit origin of money or helping an individual who is involved in predicate offence and wants to evade legal consequences of his action.”

“The concealment of the true source, nature, location, movement, ownership, property or disposition, intended that it a proceed of crime.”

“The acquisition, ownership or use of property, which at the time of receipt was known that it is a proceed of crime.”

Financial Action Task Force (FATF) is an inter-governmental body established in 1988 by a group of seven industrialized nations to combat money laundering. FATF cleared the notion that money laundering only takes place with cash transactions. Actually, it’s not the only case. Money laundering can be performed by any medium virtually, could be a financial institution or any business. 

Sources of Dirty Money

In simple words, money laundering means “the conversion of dirty money into good money.”

Following are some of the sources of dirty money:

  • Drugs and arms Trafficking
  • Criminal Offences
  • Gambling
  • Smuggling
  • Bribe
  • Online fraud
  • Tax evasion
  • Kidnapping and many more…

Methods and Stages of Money Laundering

Money laundering involves three stages; placement, layering, and integration.

  • Placement

This process is the movement of illicit funds from its source. At that time, the origin is manipulated or concealed. This process is followed by money circulation through FIs, shops, casinos, legal sector, or other businesses (both abroad and local). In simple words, in this phase, illegal funds get introduced into the financial system.

The process of placement includes many other methods:

Currency Smuggling: The physical movement of currency out of the country.

Bank Complicity: When FIs are involved with criminal entities such as drug dealers or organized criminal groups. This makes money laundering an easy process. Lack of AML procedures and checks also pave ways for money launderers. 

Currency Exchanges: Foreign currency exchange service providers open ways for money launderers for seamless currency movements.

Securities Brokers: The money laundering process can be facilitated by brokers by structuring enormous funds in such a way that it conceals the original source of illicit money.

The blending of Funds: A small number of illicit funds are blended with a huge deposit of legal funds. 

Asset Purchase: Assets are purchased with dirty money. This process is the most common method to hide dirty money. The real estate sector is misused by money launderers and real estate agents knowingly or unknowingly facilitate bad actors.

  • Layering

This process involves the transfer of funds to several accounts or FIs’ accounts to further separate the original money source. This makes complex layers of transactions that help conceal the source and ownership of illegal funds. Hence, makes it difficult for law enforcement agencies to track the money flow. 

The methods of layering include;

Cash Conversion into Monetary Instruments: After the successful placement of money into FIs or banks, proceeds are transformed into monetary instruments. In this, the banker’s money orders and drafts are involved. Material assets are bought with this cash and sold locally or abroad. In this way, assets tracking becomes more difficult to trace.

  • Integration 

In this process, laundered money is moved into the economy through the banking system. Such money appears just like business earned money. In the integration process, laundered funds are detected and identified through informants. 

Integration methods include;

Property Dealing: Among criminals, property sale to hide dirty money is a common practice. For instance, criminal groups buy properties using shell companies.

Front Companies and False Loans: Front companies, incorporated with secrecy laws in the countries are used by money launderers that lend them laundered proceeds that appear to be legitimate.

Foreign Bank Complicity: Money laundering is conducted using foreign banks. It gets hard for law enforcement agencies to point them out due to their sophisticated systems. 

False Invoices: Import/export companies create false invoices and have proven to be an effective way of hiding illicit money. This method includes the overvaluation of products to justify the funds. 

This is today one of the major threats we are facing. Who knows, if our services are used for terrorist financing? Even, sometimes the legally earned money is also transferred for the financing of terrorism. 

For terrorists, no matter how small the money amount is, it is a lifeblood for them.

Just like money laundering, terrorist financing is a predicate offence. Early detection and immediate counter steps are the only ways to combat it. 

For terrorists, no matter how small the money amount is, it is a lifeblood for them.

Concerns of Countries and Governments around the World

United Kingdom

MLR-2017, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) regulations came into force in the UK on June 26, 2017. The new regulation of the UK is tightening the reins on money laundering in resourceful ways. 

To combat money laundering, UK regulations include identity verification of customers before providing services to them. AML compliance is mandatory when it comes to screen the customers against Politically Exposed Persons (PEPs) list, sanction lists, the high-risk customers’ records, and updated criminal databases. In addition to this, employee training is also declared mandatory. Previously, regulations covered only casinos holders which now extend to all gambling providers.

China

Anti-money Laundering (AML) regulations in China primarily focus on KYC (Know Your Customer) verification of customers through identity verification protocols. China’s government has issued AML/CFT regulations on online financial institutions. FATF report for the People’s Republic of China states that China has a strong understanding of money laundering and terrorist financing risks. 

In AML/CFT regulations of China, legitimate entities are required to verify their customers with identity proof (such as government-issued ID cards). In addition to this, regular identity checks are declared important in case of a change in records of beneficiaries or regulations. In the case of any suspicious transactions crossing the minimum transaction threshold, it should be reported immediately to the relevant authority. China is taking stringent measures in the AML compliance program to combat money laundering and terrorist financing criminal activities.

The United States of America

In the USA, Bank Secrecy Act (BSA) is residing. With several amendments, this act is quite detailed and covers broad perspectives of money laundering risks of financial institutions. BSA was designed to identify the source, volume, and movement of laundered money and monetary instruments. According to BSA, banks and other financial institutions are supposed to report transactions over $10,000 through currency transaction reports. 

Not only this, CDD processes are mandatory for businesses operating in the USA. AML screening of customers against several criminal databases are updated records is necessary to comply with AML regulations. Additional federal laws are passed to strengthen the rules and regulations under BSA. Anti-money laundering programs in the USA come up with changes and scope will be extending with time.

Canada

FINTRAC, Financial Transactions and Reports Analysis Centre of Canada has recently released a final version of rules and regulations that depict amendments in the regulations to Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The changes in Canada’s regulations ensure the compliance procedures and policies to be significantly stringent. 

According to these regulations, the financial services industry needs to be dynamic in nature for the reduction of money laundering and terrorist financing activities. Virtual currency services and digital payment methods have opened ways for fraudsters to transfer their embezzled funds across the world. Moreover, regulations extend to prepaid card issuers, virtual currency providers and foreign Money Services Businesses (MSBs).

Risks for Banks and Financial Institutions 

Money laundering and terrorist financing affect the overall economy of the world. As regulated entities such as banks and financial institutions are primary sources that deal with the money in a country. These entities are opportunities for fraudsters through which they can transfer ill-gotten gains in different corners of the world. There are several risks associated with the maintenance and supervision of banking relationships to which FIs and employees should be aware of. The interconnection of banks should be secure and well-organized to track the unusual flow of transactions. Otherwise, regulatory scrutiny can subject hefty penalties which include monetary fines, imprisonments, business abandonment temporarily or permanently and assets freezing. 

What are KYC and KYB?

Know Your Customer, KYC is a process of identity verification of the customers. It is part of Customer Due Diligence (CDD). To combat high-risk customers, identity verification plays an important role. KYC is the term most commonly used in banks and financial institutions for customer verification. Now, it is needed for almost all industries because of the extended scope of fraudulent tricks and region. 

Also, to comply with the obligations of global and local regulatory authorities, businesses need to verify their onboarding customers. To verify the credibility of customers, the KYC verification process makes sure that the person is actually who he says he is. Not only customers, but the scope of KYC extends to agents, businesses, corporate entities, and third-party verification. This is what we call ‘Know Your Business’ or KYB. 

KYB involves the verification of businesses your company is dealing with. This is important to verify that your business operations are running in association with honest and registered entities. To avoid regulatory fines, verification of Ultimate Beneficial Owners (UBOs) is declared mandatory. AML regulations of FATF have explicitly stated UBO screening importance for businesses to combat money laundering and terrorist financing. 

What is EDD?

Enhanced Due Diligence (EDD) includes additional information of customers as compared to the one collected during the CDD process. To combat the risks of high-risk customers in an organization, thorough screening is performed. In-depth verification of customers is conducted by verifying their identity, not only by collecting personal but also financial information. Following is the EDD information that is collected at verification time:

  • Business/ occupation
  • Financial status
  • Income
  • Location
  • Private/corresponding baking information
  • Continuous transaction monitoring, etc. 

Enhanced Due Diligence Factors

High-risk Customer Factors

 

  • Verification of customers if they are foreigners or non-residents
  • Personal vehicle information of legal identities
  • Verification of customers if their relatives or family members are in the list of PEPs
  • Businesses that are cash-intensive
  • Risk assessment of company against AML policies and parameters

Geography Risk Factors

 

  • Countries that lack AML/CFT practices and are prone to money laundering and terrorist financing. 
  • Countries that lie in sanctions lists or have high criminal records
  • Countries that are blacklisted for facilitating criminal activities
  • Countries that do not lie under the hood of FATF members, etc.

Importance of Watchlists and PEPs

Bad actors are spreading all around the world. Your business that is providing services across the globe should be well-aware of the policies and regulations under which businesses operate. Similarly, your businesses should know high-risk entities of friend countries. Updated records of criminals, money launderers, terrorist financiers, online fraudsters and hackers, and several other watchlists should be maintained issued by law enforcement agencies, to verify each onboarding customer and secure the organization.

In addition to this, identities should be verified against the list of PEPs and their relatives to make sure that no fraudulent identity is facilitated through your legitimate businesses. In case of any discrepancy, businesses can be subjected to inevitable heavy regulatory fines. Hence, it is a regulatory requirement as well as a security concern for the protection of business from malicious entities in the financial system.

Reporting Suspicious Transactions

In a financial system, any suspicious transactions should not be ignored. To prevent money laundering and terrorist financing activities, on an immediate basis, transactions should be reported. Under the requirements of regulatory authorities and anti-money laundering laws, reporting entities are supposed to submit Suspicious Transaction Reports (STRs). It should be reported regardless of the number of fraudulent transactions. A suspicious transaction is:

  • That appears unusual
  • Appears illegal
  • Transaction performed above the specified threshold
  • Frequent transactions from one identity
  • With no clear economic purpose
  • Shows indication of money laundering or terrorist financing

Discussed in the AMLA section, failure in reporting an STR is an offence which can be subjected to a regulatory fine.

Indications of Money Laundering

The features below are recorded in the money laundering case studies that came onto the surface after investigations:

Indications of Money Laundering

Conclusion

Anti-money laundering and countering or terrorist financing is the responsibility of every business and employee of a country. Strict regulatory requirements came into force as a result of its adverse effects od money laundering and terrorism financing on the global economy. Fraudsters that are violating the legitimacy of financial institutions should be tackled by all means. This very first step is the scrutinization of organizations against AML policies and procedures. The government can impose heavy criminal and civil penalties as a result of violations of regulatory obligations. 

Before the law, ignorance is not even an excuse.  

Understanding Digital Identity

Understanding Digital Identity

What is Digital Identity?

In the digital world, your identity is made up of your personal information as it exists on the web (in digital form). Your personal characteristics, such as your name, address, date of birth, bank details, email ID, biometrics and login credentials all make up your digital attributes. 

Similarly, digital activities such as likes, comments, buying patterns, search histories, forum posts, and cellphone apps make up your online preferences. These are stored and tracked to maintain a record of online activity related to your identity.  

In short, it is an amalgamation of all personal attributes and characteristics that link the physical existence of a person to his or her digital presence. In this respect, the term digital identity can refer to all types of online platforms and computer systems that contain information about individuals linked to their national or official identities. 

This is similar to the collection of data in the real world, based on which an individual is identified and allowed to take certain actions. Official identification documents, proof of address, driver’s licenses, and other personal documents are required for transactions such as account opening or buying a property. 

Verification of persons online entails matching these two forms of identities to onboard people for digital services and to confirm their presence online. Signing up for an online account, making a purchase in an e-store, accessing medical records and accepting remote jobs becomes possible with a single click and a verified digital identity. 

This is known as digital authentication and is linked to the act of validating one’s identity at the time of sign up. The use of biometric technologies such as fingerprint and retina scans, as well as facial recognition, are all part of the process of cross-checking identities to validate if an individual is really who they say they are.

Establishing Trust Online

As businesses and services make a move to the digital world, crimes related to identity have also shifted platforms. Cybercriminals are learning to intercept digital accounts and steal identity to make fraudulent transactions. In the recent past, businesses and individuals have lost large amounts in losses as bad actors find innovative ways to stay ahead of tech experts and regulators at organisations and carry out online crimes. 

Digital Identity information is exposed through phishing attempts, irresponsible use of login details, location sharing, public wi-fi networks, and exposure to social media malpractices. Opening up access to accounts and online services, an online identity serves as a virtual currency that is exposed to data breaches. Additionally, digital identities are also sold and used against individuals in what is known as the ‘dark web’. A well functioning online system, therefore, needs efficient processes for maintaining reliable digital identities and mitigating accompanying risks. 

With impending threats of money laundering and terrorist financing, regulatory compliance in the form of KYC, AML and KYB requirements will help companies maintain trustworthy business ties online. Compliance regulations rolled out by GDPR, AMLD6 or CCPA make it mandatory for companies to opt for reliable means of verification. Strict identity checks and screening processes that verify who an individual is, and authenticate his/her access to an online portal are therefore the cornerstones  of good business practice. 

Unlocking Access to Financial Services 

The advantage of establishing a digital identity network is perhaps most evident in the banking and financial institution sector. Low cost and high accuracy than traditional vetting processes, digital identities offer faster ways of complying with regulations and attributing trust to financial brokers.

KYC checks ensure that customers are genuine entities as far as their existence, personal characteristics and documentation is concerned. For AML and ongoing background checks, identities must be traceable and accessible by verification solutions. This is easily facilitated by digital identity frameworks that consolidate pieces of information based on their accuracy and validity. For banks, this saves huge amounts of money otherwise at risk of being lost due to compromised identities. 

As observed, account takeover fraud is one of the most popular forms of fraud in the banking sector, with large corporate losses noted due to fraudulent transactions. Using traditional methods of identification, therefore, puts institutions at a higher risk of loss than digital identities, which can be consolidated and secured through advanced technologies such as blockchain. 

As a useful proof of verification, digital identities also open up new avenues for people who have limited or no access to traditional means of identification in the real world. Close to 1 billion do not have an official identity. This has grave implications in the form of barriers to basic social services such as education, health and economic opportunities. In this respect, a consolidated digital identity has the potential to act as a safety cover for people with no access to formal financial services. 

Modern organisations are upgrading to digital infrastructures and investing rapidly in safer technologies. Digital identity verification is one of the many important areas of security that require effective solutions for safer experiences online. The eventual goal is to tie the digital identity to a real person and to ensure that people are who they say they are. 

Digital KYC to Trace and Tackle High-Risk Customers

Digital KYC to Trace and Tackle High-Risk Customers

Customers are the assets and building blocks of any business. Customers are responsible for taking businesses to the next level or destroying it to rubble. That is why it very crucial to know who you are dealing with. Know your customer is the procedure to identify and verify customers to check if they are real and not fraudsters or indulged in any illicit activity that can cause a threat to business. It is a process to check the background of customers and analyze the risk factors associated with them. 

The fundamental idea behind the introduction of KYC in organizations was to find a way that can protect the organizations from fraudsters and criminals and doesn’t involve penalizing the innocents at the same time. The KYC process is a standard procedure to verify the customers at the time of onboarding. However, with strict regulations coming into the light, KYC isn’t limited to the verification of the customers, instead, it is now to continuously analyze the customer behavior to look out for suspicious activities and illicit transactions. It is used for the following purposes:

  • To curb fraud schemes
  • To mitigate scam scandals
  • To put a halt on money laundering
  • To hinder illicit fraud transfer and
  • To identify high-risk customers by enhanced due diligence 

Need for KYC to Identify High-Risk Customers:

The KYC laws were introduced as the section of the Patriot Act passed in 2001 after the incident of 9/11 to deter terrorist activities and criminal funding. The section of this act concerned with the financial transactions inserted some new policies in addition to those of “The Bank of Secrecy Act of 1970.” These requirements regulated the banks and other financial institutions. As per the Patriot Act, the organizations dealing with finance are required to meet three main requirements in order to comply with KYC regulations:

  • Customer Identification Program (CIP)
  • Customer Due Diligence (CDD)
  • Enhanced Due Diligence (EDD)

High-Risk Customer Identification Program (CIP)

The customer identification program is a significant component of the KYC process in which the organizations are obliged to ask customers to provide their identification information. It is to verify the identity of the customer who wishes to carry out a financial transaction with a particular bank. The CIP requirement was made compulsory in 2003 for the financial institutions to develop and incorporate customer identification programs into their secrecy policies to meet anti-money laundering (AML) compliance. 

Every institution has its own CIP processes depending on the size and type of the institute. That’s why they may require different documents for verification. Generally, driving license and passports the most commonly required document by the banks. Regardless, some other documents may include: 

  • Utility bills
  • Financial references or statements 
  • Information from a consumer reporting agency or public database

No matter what document or information of the individuals and business is asked, it is to check their authenticity that they are not fake or fall in any prohibited lists so that fake customers and customers at high-risk can be filtered. 

High-Risk Customers Due Diligence

Customer due diligence covers multiple aspects of customer verification and identification. For secure onboarding of clients, it is essential to identify the future risks that can arise due to some customers – the reason why customer due diligence is conducted. While performing due diligence, the significant goal is to analyze customer behavior and predict the type of transaction pattern that the customer is most likely to follow. In an evolving regulatory climate, mobile identity verification can be of great help. It helps organizations in identifying suspicious behavior and assigning a risk rating to customers to identify the customers that can be threatening for organizations and how often their accounts will be monitored. 

The regulatory agencies have set no particular standards or methodologies for conducting customer due diligence leaving the institutions with an open choice to follow their own tools and devices. Many organizations demand a lot of information during the process including banking references, previous financial statements, salary slips, occupation, source of funds, etc. The purpose of this information is to analyze the background and behavior of the customer to predict future risks that may be linked to the customer. 

All this hassle because FinCEN has strictly imposed this requirement on the financial institutes to immediately report any threatening or suspicious activity. And you can’t do it efficiently unless you know your customer behavior and history.

Enhanced Due Diligence (EDD) for High-Risk Customers:

Enhanced due diligence (EDD) is an advanced and more comprehensive set of KYC procedures for high-risk customers, exhibiting irregular transaction behavior or ambiguous sources of origin. The customers classified under the high-risk category after the Customer Due Diligence (CDD) process are more likely prone to money laundering and illegal funding of terrorists and criminals. They need to be monitored continuously. Considering the trend of such illicit transactions, the USA Patriot Act strictly dictates the institutions that they

 “shall establish appropriate, specific, and, where necessary, enhanced due diligence policies, procedures, and controls that are reasonably designed to detect and report instances of money laundering through those accounts.”

The EDD process includes verifying ultimate beneficial ownership information (UBO) and identifying politically exposed persons (PEPs). Monitoring the transactions is also one of the fundamentals of the EDD process.

High-risk Customers-Venomous for the Business:

High-risk customers are identified from the customer provided by using digital identity verification solutions. Such customers are monitored perpetually for the potential suspicious activities in their accounts so that no forgery can take place like money laundering, account takeover, identity theft, etc. Such customers can be a poisonous threat to business until they exist in the system. Various AI-powered Saas products offer inputs that are useful for the monitoring systems of the business to filter such AML high-risk customers that pose a threat of money laundering. Such a risk management framework will business in assessing customer risk. 

Digital KYC Checks- From Weeks to Seconds:

It is a documented fact that customers are the assets of any organization. Digital KYC is what the institutions need in this era of technology. Based on the principles of automation, the eKYC process can simultaneously execute multiple steps. It reduces the keystroke time, cost and human effort. The process that could take hours and days for an individual can be cut down to seconds with the help of AI-powered solutions and tools. With the use of intelligent KYC verification, the businesses can onboard a more secure clientele and that too with real-time verification, coping up with the regulatory complexities at the same time.

With the world moving into the digital sphere, customer convenience is even more important for any business. The manual KYC process is quite a time consuming and costly process. Clients get exhausted as it takes weeks or even months to onboard a customer. This cumbersome procedure even ends up losing customers as they move to other platforms during this time taking procedure. It is evident now that digital KYC doesn’t only help to identify any customer but helps to filter out customers that have some traits putting them as high-risk customers so that businesses are vigilant while dealing with them. Also, due to the digital revolution, the concept of global onboarding is becoming common which requires more fast and convenient verification and onboarding process. 

Perks of Using Digital KYC Solution:

To end up negative customer experience digital identity verification solution has achieved a milestone. Following are some of the benefits that come up with using the digital identity verification solutions for KYC:

  • Demit Frauds and Scams

Using digital KYC can decrease the risk of frauds like identity theft, credit card fraud, and onboarding high-risk clients. 

  • Increase Security

It’s more important than ever to verify the identities of customers due to an increased risk of terrorist funding and money laundering and other cybercrimes. 

  • Ensure Accuracy

Digital KYC solutions provide a seamless experience where there are lesser chances of errors and omissions. 

  • Provide Better Customer Experience

Digital KYC provides a better customer experience as it takes no time for the whole authentication process. 

In a nutshell, digital KYC clubbed with artificial intelligence is crucial to identify and tackle with high-risk customers that can bring along various dangers for businesses. Business can end up paying hefty fines due to such customers or owners end up losing their businesses. Digital KYC simplifies identity verification for an online business that plays a vital role in this area. In an evolving regulatory climate, mobile identity verification can be of great help. In the coming years, it will continue to morph with surprising speed.

Facial Recognition to Reshape the Retail Industry in 2020

Facial Recognition to Reshape the Retail Industry in 2020

The explosion of facial recognition technology in our smartphones – for instance in iPhone X – is gradually accelerating the adoption of this biometric technology. The technology is not only going to reshape the business operations but will change the way we live and shop. Counterpoint Research predicts that more than 1 billion smartphones will be incorporating facial recognition technology. It means 64% of smartphones in 2020 will have this technology as compared to 5% in 2017.

Developments in Facial Recognition Technology

Facial recognition technology has been around for some years now. However, the advancements in artificial intelligence and machine learning algorithms have introduced new revolutions in this technology. Recent developments in technology are not limited to unlocking your phone – though people are loving the idea of password-less authentication. 

With exceptional speed and ease, this face-driven technology is enhancing the security making access to public places more convenient and personalized. Moreover, through facial recognition, the unique biometric token (face ID) empowers frictionless and personalized user experience – whether it’s an airport, hotel or a shopping mall. These evident user benefits are making this technology more acceptable in society. 

Lifting Public Security Through Technology

Security has always been a major concern for businesses – online and physical both. In brick-and-mortar retailing stores whenever people gather, there is always a security threat triggering security concerns not only in our minds but also for owners as well. The major challenge that businesses face is to balance security and customer experience. To achieve both at the same time, retailers need an efficient solution.

Surveillance cameras with integrated facial recognition technology are the best solution to address security concerns in public shops. The retailers can ensure that only authorized entities can have access to their services and facilities. Moreover, the presence of any suspicious or threatening person can be reported immediately – taking immediate action.

Moreover, the inclusion of facial recognition technology in consumers’ product is encouraging more people to accept this technology for surveillance. 

Prevent Theft and Eliminate Chargebacks

Theft seems like a retailer problem but it flows down to customers as well. The loss of theft is often passed down to customers in the form of higher prices because of a shortage of certain products. Seeing such trends and outcomes of the theft, retailers are using the facial recognition technology to guard themselves and customers against shoplifting crimes.  

Shoplifting and theft aren’t limited to physical retailing stores. With the explosion of e-commerce platforms, the fraudsters have found another opportunity to exploit the user accounts and make fraudulent purchases. These frauds result in chargebacks for retailers. To combat fraudulent chargebacks, online face verification is a proactive solution to authenticate authorized customers at the time of login and checkout as well.

Personalizing the Customer Experience

Face biometrics are the unique keys unlocking the contactless personalized customer experience in the retailing industry and will continue to open more doors in the near future. According to Markets and Markets Research, the facial recognition market is expected to grow $6.84 billion by 2021 as compared to $3.35 billion in 2016. 

From the retailers’ point of view, the real-time facial recognition solutions not only enhance the customer experience but also positively impact the bottom line. For example

  • Alerting the staff when some VIP customer enters the store
  • Enabling staff to offer personalized sales and services to their customers.
  • Enhancing customer service protocols, etc.

A single Face ID can take the customer experience to the next level. Whenever a customer enters the shop, the camera can scan a person’s face and alert the staff. It allows them to greet the customers by name personalizing their check-in experience. The best part about this technology is that it can be integrated with the existing systems, making it an easier and cost-effective solution.

Bringing online and offline experiences face to face

The eruption of online shopping and e-stores are enabling retailers to offer their customers real-time recommendations and suggestions. It is done automatically by the systems to gather the customer activities data of various online suggestions and predict customer behavior.

For instance, by gathering the customer’s geolocation, gender, age group, search history, and shopped products, the system can analyze the pattern and come up with the products that may be of user interest. Through the facial recognition system, the merchants can easily map their customers’ online and offline behavior. It allows them to provides customers with boundary-free shopping navigation.

For example, the retailers are coming up with an innovative shopping process that allows customers to order products – like groceries – online instead of doing it physically and collect it from the shop. The in-store facial recognition and verification cameras can alert the staff to compile the order as soon as the customer arrives. This saves shopper’s time and effort hence, enhancing the customer experience.

Express better understanding

The facial recognition software is advancing every day. Now it not only collects the person’s data – like name, demographic, age, gender, etc. – but also the facial expressions and how long a shopper takes to buy a particular product. Artificial intelligence and machine learning algorithms are making this technology smarter than ever that it can read expressions and know what shopper’s expression conveys. 

One of the retail giants, Wallmart, has already introduced the facial recognition tech that can capture the customer’s expressions standing in the checkout line to analyze the satisfaction or dissatisfaction level. Moreover, these findings and collected data enables the retailers to refine the in-store displays and real-time promotions that could attract customers.

Try Before You Buy

In brick-to-mortar stores, customers do have the opportunity of trying the products, e.g. clothes. But what about e-stores? To address this limitation businesses are actively using Facial recognition technology along with augmented and virtual reality to introduced exceptional virtual experience for their customers. Examples of such businesses include Amazon and Sephora.

Sephora Virtual Artist 

Sephora, one of the largest beauty retailers is quite famous for its immense customer experience. Stepping into the technological world, Sephora is also making active use of facial recognition technology and boosting its sales. Through augmented reality and real-time face verification, it is improving the customer shopping experience.

Sephora’s AR solution, also known as Sephora Virtual Artist, empowers customers to try makeup products virtually in real-time. Just by showing the face to camera, the customers can get the best 3D live experience. This technology is taking the shopping experience to a whole new level, eventually resulting in better sales.

Amazon’s Virtual Changing Room

Amazon, one of the renowned retailing giant has faced an increased clothing return rate because of online shopping. The reason was the customers weren’t satisfied with the color and style of the product. Taking into account this increasing trend, Amazon is looking out for new ways to provide its online customers with a “try-before-you-buy” experience.

With its virtual changing room app, Amazon is setting new shopping standards for customers. The facial recognition technology scans the customer’s face and body and by obtaining the user’s interest, choice and preferences, the app presents real-time recommendations and suggestions. Through the app, the customer can also virtually try the clothes and see how the dress will look like. 

It not only enhances customer experience but also leads to more precise, accurate and smarter purchase decisions.

The Way Forward

To sum up, facial recognition technology is playing an essential role in the retailing industry to enhance the customer shopping experience. As per Market Research Report, the global facial recognition market is expected to reach $8.93 billion by 2022, growing at a CGPR of 19.68%. This research gives us the insight that this technology is going to shape the retail industry beyond our imaginations.

Business Verification: A new line of Defense against Fraudsters

Business Verification: A new line of Defense against Fraudsters

With the ever-increasing complexities of anti-money laundering (AML) and counter-terrorism financing (CFT) regulations and the increasingly global nature of the financial sector, banks and other financial sectors are spending a notable budget, time and effort to comply with AML and CFT regulations.

By the time the financial institutions and regulators catch up with the latest criminal tactics using advance technologies and airtight regulations – the criminals are already implementing more advanced methods to carry out financial crimes. Because of the obligation to constantly upgrading against fraudsters, it is always an ongoing challenge for the financial institutes to stay a step ahead of criminals and regulatory authorities. But how do they manage to do that? Attaining a commendable knowledge of Know Your Business (KYB), Know Your Customers (KYC) and AML regulations is a good point to start. 

While KYC is not new, businesses know all about KYC and are constantly adopting new technologies to make the KYC process smooth and accurate, KYB, on the other hand, is a comparatively new phenomenon and demands financial institutes to put some extra effort. 

A report published by OWI labs intimates that KYB verification, a $5.6 billion market in 2017 is expected to grow to $11.8 billion in 2022. Meanwhile, after the Panama leaks scandals, the regulatory demand for global business verification heats up in the US, Europe, Japan, Australia, Singapore, and many jurisdictions. 

These stringent regulations have made customer onboarding a complicated process. While these requirements can look complex and demanding to the financial sector but implementing them is certainly useful for financial sectors to defend against fraudsters. The tactics and techniques of financial criminals are evolving. It is not sufficient to keep pace with regulatory requirements only, the financial sector needs to stay on top of the game.

What is KYB and Why is it considered a shield against Financial Criminals?

Although, it is impossible to eradicate fraud once and for all. Same as a weed that grows wild and couldn’t be erupted for good, financial criminals continuously keep finding the vulnerability in the system. Equipped with AI and Machine learning, FinTech is assisting the financial sector in this fight against financial criminals. Owing to changes in the regulatory requirements for verification of business, business verification services featuring Artifical Intelligence are proposed by the FinTech industry.  

Main Drivers of Business Verification Services

Artificial Intelligence

The main drivers of global business verification services are the increase in focus on thorough due diligence of the businesses and beneficial owners from regulators in Europe and the United States. Moreover, compliance cost for the due diligence is very high and verifying businesses manually is not a time taking process. 

AI-based global business verification technology can reduce compliance costs for the financial institutions while maintaining quality standards and enhancing the customer experience. Another feature that makes automated business verification services distinct and reliable is the global verification facility. While manual verification takes the time it is also limited to the jurisdictions. For instance, the 6th AML directive by the EU requires countries to maintain a central registry for the listed business entities.

Future of Know Your Business Verification

As discussed previously, criminals always come up with new tools and techniques. Although AI-based Identity verification services are assisting in the elimination of financial crimes but will it remain strong enough in the future? This is the question yet to be answered but it is too early to make assumptions.

BlockChain Technology

On the other hand, technology is constantly making the process and there are more efficacious innovations in the backup. One such technology is Blockchain. With blockchain technology, financial institutions would be able to secure and exchange client information without maintaining a central register. This will help improve the KYC and KYB process and will further reduce compliance costs. 

The current technology is a bit exposed to data breaches and achieving compliance with GDPR is complex. Only a handful of KYB solutions providers are compliant with GDPR and other major data protection regulations. With the advancement in technology, the new methods are expected to enhance the financial security and risk management.  

The technological revolutions are making positive improvements and are adopted to fulfill the requirements of financial institutions and in this era of digital competition and complex compliance requirements, businesses need to adopt a robust business verification service. By automating the business verification process, the financial institutes can easily verify the business entities when onboarding. In addition to this, compliance with complex regulations will become easier.         

Child Identity Theft - 7 Ways to Protect your Children

7 Ways to Protect Your Children from Identity Theft

Living in the digital world, the word “Identity theft” makes us more than a little nervous. Knowing that someone out there is using your identity for criminal activities sound so scary. It is even more surprising for parents to know that stealing their children’s identities is easier. What makes it more frightening is the nature of the theft that it may take too long to discover the crime.

No one can provide better protection to children other than parents. Parents are ultimately the best protection against child identity thieves. However, the lawmakers are now actively taking part as well in raising awareness about this matter. In fact, there are some movements for the protection of children’s data – for instance, National Child Identity Theft Awareness Day. 

Moreover, the government is introducing Child protection laws – The Digital Economy Act 2017 – to protect the identities of children in the digital world. These laws enforce the digital platforms to incorporate age verification checks to their digital platforms to keep minors away from the dark web and age-restricted mature content.

National Child Identity Theft Awareness Day

Identity theft is becoming a worldwide issue. Every year millions of people fell victim to this crime and lose billions due to frauds that occurred using stolen identities. According to The Harris Poll, around 15 million Americans fell victim to identity theft in 2017. Not just the adults but the children are equally or more on the target list of identity thieves. According to Javelin’s Report, more than a million children were the victims of identity theft in 2017 which resulted in a loss of $2.6 billion.

Taking into account the alarming situation of children identity theft, the world’s leading global information services company, Experian, started the movement “National Child Identity Theft Awareness Day” – held on September 1 every year. The aim of this movement is to educate the parents about protecting their children’s sensitive information. Most parents are unaware of the reasons and vulnerabilities that lead to identity theft. As per a study, the children who are bullied online are nine times more likely to fall victim to identity theft.

Identity thieves primarily target children because of their clean histories and the criminals can use their information for a longer period of time without getting caught. The reason is parents are oblivious of the fact that their child’s identity is under threat. Hence they don’t necessarily check their children’s credit report.

The Cultivating Threat

The nature of the crime “Child Identity theft” to stay undetected for a longer period of time makes it hair-raising. Every year criminals succeed in exploiting millions of children’s identities. The explosion of the internet and smart devices is not helping either, instead, it has fueled up identity theft to an alarming rate.

Tips for Parents to protect their Children Identity

Tips for Parents to protect their Children Identity

Parents are often under the wrong impression that their child’s identity will never be stolen and that’s what they do wrong. Even if you are sure that your children are safe, a few preventive measures won’t hurt, right? There are some common red flags parents don’t pay attention to and hence their children get stuck with privacy problems. 

Here are some simple tips for parents to protect their precious bundles from falling victim to this rising crime.

Look out for Red Flags

The best way to deal with the problem is to know its root causes first. Once you are aware of the factors that can lead to some problems then you can easily combat that. In order to protect your children from identity theft, you must look out for warning signs. Just imagine you come across a pre-approved credit card offer in your child’s name. It may sound some computer glitch to you. But what if it’s not?

This can be a warning sign that someone is using your child’s identity. If you ignore this thinking of it some computer mistakes then it may lead you to a major problem. 

Monitor your child’s Social Media

Living in the world of mobile phones and tablets, children using the internet is not something new. Every child now has a presence on the internet whether it’s about watching cartoons on youtube, playing games or using social media. You have no idea who the fellow gamers and anonymous friends are. They can even be identity thieves or pedophiles.

Allowing your child to explore the technology isn’t bad but leaving them on their own may have a negative impact. If you are letting your children participate online then make sure to monitor their activities. The passwords of the accounts must always be available to parents so that they can check regularly with whom their children are interacting. Children may find it their privacy breach or may just hate the idea of giving their passwords. But it’s essential for their protection.

Protect your Child’s Social Security Number

The social security number is the key to a child’s identity and is the first thing that identity thieves target. They can use it to unlock many hidden doors for their benefit. The stolen SSN can be used for multiple purposes – the creation of synthetic identities being the significant one. These identities can be used to open a bank account, issue a credit card, get a bank loan or a car and health insurance, etc. By the time such frauds are detected, it has already caused enough damage.

To avoid these situations, as parents what you can do is obtain SSN for your children first and then keep it safe. Parents need to be vigilant in sharing the children’s SSNs. there are many organizations that ask for children’s social security numbers even though they don’t need it. In such cases, parents should inquire about which purpose are they going to use it.

Open Joint Bank Account

Parents are often seen opening bank accounts on their children’s names to deposit saving checks and bonds. But these savings accounts can pave the way to identity theft. Since once your child’s account has an account, it means that there will definitely be bank statements, emails and letters from the bank. The fraudsters can access that information by some means and use it to get their hands on your child’s cash. Moreover, criminals may use that account to do business or for illegal transactions like money laundering, terrorist funding, etc. 

If you are opening an account on the child’s name then make sure to link it to your account as well, or open a joint account. It will help you keep an eye on the transactions and monitor the payments. Whenever there is some suspicious activity you can be notified instantly. Sometimes, clever crooks use the child’s account to take loans from banks which they have no intention of returning. In those circumstances, the child’s name will be reported to the agencies which may lead to a severe mess, difficult to clean up. By having a joint account, your permission will also be required in order to process any payment or loan.

Dispose of Data Carefully

The discarded data is worth a million in the dark web since the criminals can use it for multiple illegal reasons. You need to be very cautious while throwing away the garbaged documents. Always dispose of the documents, or anything addressed to your children before throwing them out. The things that are wastage for you can be valuable for crooks. 

Safeguard your smart devices

The advancement in technology has opened new doors for cybercriminals to exploit the user devices and obtain the personal data stored in it. It is your duty as parents to secure your smart devices in every possible way. Never store your sensitive data on laptops or mobiles. Always keep it stored in external hard drives or flash USBs.

Moreover, set strong passwords for your devices and install security apps and antivirus software to keep them secure. 

Find and Freeze Credit Report

We often think that children don’t have any credit histories so why would identity go after them? That’s where we are wrong. The clear status of the child’s credit history intrigues the thieves since using their identity they can apply for credit cards, open utility accounts, take out loans, commit tax frauds and many other forms of digital fraud. Timely check the credit history of your children. If no credit report exists then it’s best otherwise immediately get the report and proclaim it to the respective authorities. It may be a sign of possible identity theft.

Need for Identity Verification in Real Estate and Its Real-World Use Cases

Need for Identity Verification in Real Estate and Its Real-World Use Cases

The real estate industry is in dire need of identity verification processes. The reason being, the transfer, and flow of illegal money across the globe. Criminals are always on the search for opportunities that could contribute to their embezzle funds transfers. Money laundering and terrorist financing are made possible for criminals to conduct it through real estate. Fraudsters have found tricks to fool the real estate agency through which they have learned the ways to clean the ill-gotten gains before enjoying them.

Study shows that the real estate has reached to the crimes of worth $1.6 trillion annually. The lack of a monitoring system estimates this value to increase in the coming years. Here comes the need for identity verification. Identity verification of the property seller, property buyer and the entities that are offered with certificates for multiple purposes. There is a need to verify the person involved in dealing with real estate. This will reduce the chances of bad actors if they are screened through various verification parameters. This step is not as complicated as it seems. Online customer identity verification services are available which help you verify the identities in real-time providing a streamlined process.

In the past few years, the criminals have exploited the real-estate sector to launder their black money and to convert it into white money. Panama Leaks is one of the recent money laundering cases that jolted the regulatory authorities from their deep slumber regarding the need for regulatory scrutiny of the real-estate sector. 

How Real-estate is exploited?

Money launderers find the least regulated regions and then launder their money to buy real-estate. Later the criminals would conduct several buying and selling transactions and incorporate the black money within the sale proceeds of the real-estate. Real-estate is exploited in the integration phase of money laundering. 

Local Legislations and Real Estate

For the accurate and transparent transfers of property, local regulators are active. UK, Germany, Canada, Singapore, Australia states are all adopting efficient ways in real estate to streamline the process of customer verification. To avoid reputational damage to a company, now the organization that complies with local regimes is considered more reputable. 

The UK has given the time till 2021 to the real-estate owners to get registered with the concerned authority. So it’ll filter out the money launderers. The registers of real-estate owners will be shared with the public. So, businesses will have the ability to identify criminals among the legitimate sellers of real-estate. 

By implementing an Electronic Verification System (EVS), real estate agencies can deter the risks of fraud. It is important to screen the customers against electronic databases that contain the lists of exposed persons either they are money launderers, politically exposed or terrorists. These updated lists would help in verifying the identity in seconds. It is a smart way to protect your real estate business from criminals. 

Use Cases of Identity Verification In Real Estate

To strengthen the overall dynamic security measures, it is important to integrate digital identity verification services with the system. This verification system authenticates the customer based on several supporting shreds of evidence that could be official identity cards, bank accounts, and other documents. The following are some of the use-cases that are covered in real estate by identity verification.

Customer Due Diligence

 Identity verification is mandatory to perform Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) processes in the system to verify the customers against strict verification checks. This step serves the purpose when it comes to avoiding illicit funds transfers.

High-risk Transactions

Money launderers have smart tricks to transfer money across the world. It gets hard to track the path of money flow and to differentiate dirty and clean money. Real estate can verify each of its customers before proceeding with any transaction. The property documents should be verified to make sure that it is coming from an honest entity.

Updated Criminal Databases 

Identity verification API collaborates with the updated criminal records against which identities are verified. These criminal records include the list of politically exposed personalities, money launderers, cybercriminals, terrorists and similar entities. Against these sanction lists, each entity is screened to make sure that onboarding identity has not been a part of any criminal activity before or currently.

Compliance Requirements

Local regulators have proposed serious laws regarding identity verification of the customers. These laws came into effect as a result of criminal activities through real estate in various areas of the world. To avoid regulatory penalties, it is important to comply with the requirements of compliances strictly.

To wrap up, real-estate has a huge growth potential that will not tarnish with time but will enhance. The criminals are exploiting this sector for long. But now the regulatory authorities require this sector to practice customer due diligence on their buyers and sellers. It’ll reduce criminal exploitation of this sector. 

Digital identity verification and KYC screening of customers will help real-estate businesses to gain global risk cover against financial criminals.

How AI is Transforming the Banking Sector

How AI is Transforming the Banking Sector

Artificial Intelligence has extensive applications across several domains: from banking to health, to travel, to finance. It continues to gain traction across industries that rely heavily on data which virtually encompasses all industries. The IHS Markit’s “Artificial Intelligence in Banking” report declares that the global cost for artificial intelligence is expected to reach $300 billion by 2030. AI in banking sector is no exception and it is providing remarkable benefits to banking. 

A study by PricewaterhouseCooper shows that 52% of the financial services industry is making considerable investments in artificial intelligence. 72% of business decision-makers assume that AI will be the business advantage of the future. Machine learning has become an important fixture in banking, leading to infinite possibilities as it continues to grow and advance.

How is AI Contributing to the Banking Sector 

There are a number of ways artificial intelligence is revolutionizing the banking practices. Fraud detection, seamless customer support, mobile banking, risk management are some of the fields in which AI is contributing in. 

Fraud Detection 

For financial institutions like banks, security is one of the topmost priorities as banks are under constant threat of frauds and hacks.  Through AI, decreasing rates of false positives, preventing fraud attempts and lessening manual reviews of potential payment frauds is achieved. According to a recent survey, ‘AI Innovation Playbook’ published by PYMNTS in collaboration with Brighterion, 80% of fraud specialists who employ AI-based platforms believe the AI technology helps reduce payment frauds and prevent fraud attempts. 63.6% of financial institutions that utilize AI believe that it is capable of preventing fraud before it happens. This shows the scope of AI for the mitigation of payment frauds. Payment frauds are reduced through AI’s ability to interpret trend-based insights through supervised machine learning, which is then joined with completely new knowledge achieved through unsupervised machine learning. Through the combination of both types of machine learning, it is determined whether a transaction is fraudulent or not. 

The following points depict why AI is one of the most used tools to combat payment fraud: 

  • With the advancements in technology, payment fraud attacks are increasing in complexity. These attacks normally have a digital footprint or sequence which makes them undetectable using predictive models alone. AI plays its role to mitigate these kinds of attacks and provide a security layer to the bank. 
  • Through the use of AI, payment fraud can be detected swiftly even on a large scale. This is how AI provides an immediate advantage to banks in battling the many risks and methods of fraud. 

Through AI’s predictive analytics and machine learning, anomalies in large-scale data sets can be found in seconds.

Cost Reduction 

Along with the number of other advantages of AI in the banking sector, cost reduction is a big one. It is estimated that by 2023, $447 billion will be saved in costs through the use of artificial intelligence. By utilizing AI, banks can cut costs in three key areas: 

  • Cycle Time

A huge amount of time is spent in digitizing, identifying and onboarding document templates. Through the automation of the digitization process, banks can reduce the total time spent on this circle. This results in highly improved cycle times and the benefit of redeploying employees to more important projects. 

  • Error Rate 

Errors are costly yet unavoidable. A recent survey by Netwrix shows that human error is one of the leading causes of financial data breaches. Through automation in banking systems, errors are lessened to a remarkable degree without an increase in cost. AI systems are much better at handling unstructured data which leads to lower error rates. 

  • Solution Costs

Costs of document digitization are huge. Based on the data from IBM, the traditional onboarding process can cost hundreds of millions of dollars. AI tools that are 80% automated and results in 90% accuracy are utilized so that banks are capable of reducing the costs of these onboarding processes. Approximately 30 to 40 percent of the original cost spent on the onboarding process can be saved. The AI-powered onboarding process also results in lessened error rates and greater use of employee labor. 

Enhanced Regulatory Compliance

Banks are always under intense pressure from regulatory bodies to enforce the most recent regulations. These regulations are there to protect the banks and customers from fraudulent activities while at the same time, reducing financial crimes like money laundering, tax evasion, and terrorism financing. AI in banking also helps ensure that banks are compliant with the most recent regulations. AI relies on cognitive fraud analytics that watches customer behaviors, track transactions, recognize dubious activities and assess the data of different compliance systems. 

Businesses can remain up to date with compliance rules and regulations through the use of AI. AI systems can read compliance requirements and detect any changes in the requirements through deep learning and natural language processing. Through this, banks can remain on top of ever-evolving regulatory requirements and align their own regulations with them. Through technologies like analytics, deep learning, and machine learning, banks can remain compliant with regulations. 

Seamless Customer Experience

Customer experience affects every business in the world, including the banking industry. Customer experience directly affects the way people perceive an organization. Especially in the case of banks, people want access to their money 24/7 and they want swift and easy transaction as well. This is where AI chatbots and voice assistants play their role. Chatbots don’t follow any timezone which helps users access them anytime, anywhere in the world. 

The most important feature of these chatbots is that they are constantly learning through previous customer interactions which in turn helps enhance them and their customer service. An example of chatbots in banking is the virtual assistant of Bank of America, Erica. Erica constantly sends notifications to their clients, updates users about their credit scores and helps them pay bills and make transactions automatically. 

Apart from chatbots, banks are also employing humanoids. Pepper, which is a humanoid developed by SoftBank, is one such example. Through the use of AI, customer experience is enhanced which in turn increases revenue. 

Risk Management

When it comes to customer onboarding or granting credit cards to clients, there is always a risk factor associated with it. To mitigate it, a thorough check of the potential customer is needed to authenticate the client. Through the use of AI, Know Your Customer (KYC) checks are done in real-time to identify the clients. Thus, AI offers the chance to save banks millions of dollars due to fraudulent or poor credit applications. Through the use of biometric technology which includes fingerprints, facial recognition scans, iris scans, voice recognition, etc., banks can implement a supplementary layer of security which in turn helps mitigate risks. 

Mobile Banking

Mobile banking is also another application of artificial technology in banking. AI in mobile banking has remarkably revolutionized the concept of banking and customer experience. The core features of mobile banking are 24/7 availability anywhere in the world as well as providing more opportunities for the bank staff to concentrate on more complex issues. According to a survey by the National Business Research Institute, 32% of financial institutions are already using AI tools like predictive analytics, voice recognition, and recommendation engines to provide a more personalized touch to the customers. 

The impact of artificial intelligence and machine learning in the banking sector runs deep. As we continue to become comfortable with the existing AI applications, it will continue to enhance and grow savvier. The banking industry is seeing a number of innovations due to artificial intelligence and machine learning and in the upcoming years, these innovations will continue to progress.

AML/KYC 2020 - how 2019 changed the landscape of global regimes?

AML/KYC 2020 – how 2019 changed the landscape of global regimes?

Copy pasting your 2019 AML/KYC compliance strategy to 2020 plan will not do the job. Businesses need to change their AML/KYC compliance strategy to comply with the latest regulations. 

Anti Money Laundering (AML) and Know Your Customer (KYC) regimes evolved during 2019 on a global scale. Regulatory authorities like FATF, FinCEN, FINTRAC, and the EU government took some rigid steps to make KYC and AML compliance a global phenomenon. 

Regulatory and supervisory authorities are bringing all the industries under the radar to make AML/KYC compliance inevitable for reporting entities. The Danske Bank and Swedbank scandal made the global financial sector learn the lesson and to take compliance seriously.  Also, the heavy fines charged from non-complaint online businesses like gaming, cryptocurrencies, etc. initiated the trend of AML/KYC compliance among these industries. 

Below is a brief review of some major changes that occurred in KYC and AML regimes around the globe in 2019. 

Fifth AML Directive (AMLD 5) of the EU to be implemented in 2020

EU introduced the fifth AML directive in 2019 which is all set to change the AML compliance in the EU. The businesses are required to comply with this law by January 2020. 

AMLD 5 introduced the amendments for financial institutions, prepaid cards, credit institutions, real estate, legal sector, and virtual currencies, etc. The new directive requires the reporting entities to practice enhanced due diligence. 

The identity verification threshold on remote transactions of prepaid cards was reduced to EUR 50. Also, AMLD5 called for a reduction in the threshold of anonymous prepaid cards – from €250 to €150. Now the prepaid card providers will have to practice customer due diligence on every customer making a transaction or depositing more than €150 in his prepaid card account. This will help the authorities control the anonymous use of prepaid cards for illegal fund transfers. 

Virtual currencies need to apply customer due diligence just like traditional financial institutions. So thorough KYC and AML screening of customers is inevitable for businesses. 

FATF digital ID Systems Guidance

 

FATF took the Regtech initiative back in 2017 by showing a positive attitude towards technological advancements in the financial industry and regulatory framework. 

FAFT issued a guidance paper for digital ID systems. The guidance paper is open to suggestions from the stakeholders. The stakeholders of this guidance are the regulatory and supervisory authorities, businesses and government agencies. 

The guidance provides a brief insight into the process, components and technical standards of digital ID systems. It referred to NIFT Digital ID Guidelines and EU’s EIDAS Regulations

As FATF is a global authority and has several member countries from every corner of the world it is projected to make a huge change in global AML/KYC compliance practices of businesses. 

FATF recommendations for the legal sector, virtual assets

 

In June 2019, FATF gave revised recommendations for the legal sector and virtual assets. Now, these sectors in the member countries of FATF are required to practice thorough AML and KYC screening on their customers. Legal professionals are guided to verify the identity of the Ultimate Beneficiary Owners (UBOs) of the businesses they work with. 

Also, businesses dealing with virtual assets (cryptocurrencies,etc.) are required to perform AML/KYC screening on their customers just like the financial institutions. 

FATF also drafted the recommendations for art dealers, weapon dealers, and precious metal dealers to exercise regulatory compliance. These regulations are drafted to bridge any loopholes in the regulatory framework. 

Global authorities becoming more stringent towards real estate

 

Global regulatory authorities are becoming stringent towards real-estate. This sector is commonly used for money laundering. Canada, Singapore, UK, and Germany are some countries that imposed owner verification regulations on real-estate in the past years. In 2018, (AML) legislation was introduced according to which foreign owners were supposed to identify themselves. The purpose of this bill was to find out who is the owner of a particular real estate property. By 2021, the registry will be made public. 

AMLD 6

 

The AMLD 6 was also proposed in 2019. Sixth Anti-Money Laundering Directive (AMLD6) highlights a stringent framework to combat money laundering and terrorist financing. It extends the scope of criminal liabilities and entities with an updated list of predicate offenses. AMLD6 came up with tougher penalties and widens the criminal liability to legal persons. 

AUSTRAC all set to regulate MSBs

 

AUSTRAC launched a campaign against the unregistered money services businesses (MSBs). It requires the MSBs to register with AUSTRAC and to follow the AML/KYC regulations carved for them. Money transfer businesses that will not register with AUSTRAC will be liable for a fine of $420,000, seven years jail or both. 

These new regulations are implemented to mitigate money laundering and terrorist financing in the financial infrastructure. The MSBs are exploited by financial criminals due to a lack of customer due diligence practices in this sector.

Other than AUSTRAC, FATF and FINTRAC also adopted a risk-based approach towards MSBs. 

The U.S treasury international financial institutions initiative

 

The U.S expanded its counter-terrorism powers and now targets the international financial institutions around the world that aid the terrorist groups working in the U.S. Also it added three Korean groups, namely, Bluenoroff, Lazarus Group, and Andriel into sanctions lists. 

The UK expanding the scope of MLA-2017

 

The UK also amended its KYC and AML regulations and expanded the scope to an international level. The Money laundering Act (MLA-2017) of the UK was amended. The UK-based businesses will practice the MLA rules in their international affiliates operating in non-EEA states. 

To wrap up, 2019 was a phenomenal year for KYC/AML regulations where the authorities not only worked on enhancing the AML regulations but also on improving the compliance habit of liable entities.  

The fraud and planned crime cases in the past few years made the regulatory authorities to draft more focused and detailed KYC/AML regulations to mitigate money laundering, terrorist financing, and crimes related to identity theft. One fake or stolen identity if used wrongfully could initiate a chain of crime that could affect a lot of stakeholders. 

The changes that happened in 2019, made regulatory compliance inevitable for businesses. Many future-oriented businesses are using KYC/AML screening solutions to practice global compliance. Because there are just two ways out of this situation, either it is compliance that leads to fraud-free growth or non-compliance that leads to hefty non-compliance penalties and fraud losses. 

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