Digital KYC and AML for Online Businesses

AML Technology Eradicating the Perils of Money Laundering

AML Technology Eradicating the Perils of Money Laundering

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In the past few years, we have seen a substantial increase in the number of legislations regarding how legal entities especially financial institutions combat financial crimes like terrorist funding, money laundering, and identity theft. A report estimates that in 2009, criminal proceeds amounted to 3.6% of global GDP, with 2.7%  (or USD 1.6 trillion) being laundered. Businesses are in dire need of KYC and AML compliance to fight back all such frauds. Business owners are deploying various measures against scams but the AML compliance program is effective out of all. 

AML compliance program is basically a methodology that defines the role that governs how a company monitors accounts, detects and reports financial crimes to relevant authorities. AML screening tackles with the intrinsic money laundering risks the company faces or can face in the future. The role of legislation is crucial in order to know how the AML compliance program should work. Customer screening for anti-money laundering is for completing due diligence to prevent and deter money laundering, terrorist financing, and other financial crimes and frauds. 

Why AML Compliance?

AML( Anti Money Laundering) practices have been used for businesses around the globe and all regions require the businesses to perform due diligence on their customers in one way or the other. AML compliance is not as difficult for organizations to follow as it seems. An investment of a few thousand dollars can obviously demit the loss of millions in penalties that businesses will have to pay eventually. 

To detect suspicious transactions and analyzing customer data, Anti-money laundering AML screening has been employed by financial institutes and other businesses. To filter customer data and classify it according to the level of suspicious and inspect it for errors is done by AML systems. Any sudden and substantial increase in funds or a large withdrawal of cash includes such anomalies.  AML checks are not for money laundering but also put a tight reign on frauds like tax evasion, terrorist financing, etc. AML compliance has a system to report money laundering activities to relevant authorities evaluating the client’s risk profile. 

Artificial Intelligence Enhancing AML Checks:


Artificial intelligence (AI) has the potential to transform financial institutions (FIs), disrupting every aspect of financial services, from the customer experience to financial crime. AI technology can be utilized by FIs in a number of ways, with anti-money laundering (AML) one of the main areas of focus. FIs can employ AI to analyze large amounts of data, to filter out false alerts and identify complex criminal conduct. It can identify connections and patterns that are too complex to be picked up by straightforward, rule-based monitoring or the human eye.

FIs are awakening to the potential of AI, both internally and externally, and beginning to embrace it. According to the Digital Banking Report, 35 percent of financial organizations have deployed at least one machine learning solution. Artificial intelligence has the ability to completely transform how banks perform AML and Know Your Customer (KYC) compliance. Additionally, for this need of anti-money laundering, artificial intelligence systems are capable to mine a great volume of data to prevent risk, which simplifies the process of identification of high-risk clients.

 AI is crucial when performing repetitive tasks, saving a lot of valuable time, resources and efforts that can be refocused on other tasks. AI technology including natural language processing NLP and machine learning ML can create automation in process of AML screening.

How is AML Compliance impacting Businesses?


AML compliance can intelligently extract risk-related facts from a huge volume of data making the process of identity verification a lot more smooth and risk-free. It has the ability to track the alterations in regulations around the globe. It fights against financial crimes by identifying gaps in customer information by financial institutions and provide Know Your Customer ( KYC) alerts. Here are ways in which  AI has revolutionized AML screening to help the client onboarding process easy, resulting in bringing higher revenue and lower fraud risk to the business:


  • Enhanced Due Diligence:


Artificial intelligence can automate AML screening that helps automate the creation and updating of the client risk profile to match this against the classification process i.e high, medium or low risk that ensures continuous compliance throughout the client life cycle. Moreover, it assists the process of identity verification easier for enhanced due diligence.


  • Improved Client On-Boarding:


When applied to workflow automation, AI along with AML  has the ability to transform the generation of documents, reports, audit trails and alerts/notifications.


  • Risk Assessment :


AML compliance can help mitigate risk as whenever a client is highlighted with a suspicious activity system can block resulting in the removal of any sort of risk. It gives a full understanding of the different tiers of risks a customer presents and how to mitigate them


  • Detection of Suspicious Activity:


Any suspicious activity can be detected and immediately reported to the concerned department without putting yourself in trouble. The goal here is to have systems in place for prompt detection of activities associated with money laundering. For instance, suspicious activity can be:

  •  Increase in cash deposits of or business without any obvious reasons.
  •  Providing very little information when applying for a bank account.


  • Managing Regulatory Compliance and Change:


AML screening ability to counter patterns in a vast range of text enables it to make an understanding of all changing regulatory environment. Furthermore,  to analyze and classify documents to extract useful information such as client identities, products, and procedures that can be affected by regulatory changes. It can be instrumental in helping banks and other financial institutions to fight back financial frauds. 


  • AML Screening and Investigation:


A recent Dow Jones-sponsored ACAMS survey revealed the most challenging for bank compliance is of false positive. Underpinning the alert generation method with AML may end up in fewer false positives. whereas they’re a major part of the AML compliance method, alerts don’t seem to be enough to support an efficient and thorough investigation method. What’s needed is that the linking of high-quality information to the alert (via interpretation associate degreed link analysis) to supply a correct, graphical illustration of the legal entity structure. AML beside AI will facilitate to leverage antecedently performed steps within the alert investigation method to formulate a suggested next steps approach.

Read more about how AML regulations can help prevent financial crimes:

AMLD5- Closing the loopholes of AML:


Consider new technologies and improve transparency AMLD5 is here to fulfill the EU’s next-generation AML requirements:

The goals of 5AMLD are as follows:
  • Impact on  financial intelligence units and facilitate increasing transparency on who really owns companies and trusts by establishing beneficial ownership registers
  • Prevent risk associated with the use of virtual currencies for terrorist financing and limit the use of prepaid cards
  • To secure the financial transaction to and from the high-risk third parties. 
  • The access of financial intelligence units to information including bank account registers must be enhanced. 
  • Ensure centralized national bank and payment account registers or central data retrieval systems in all member states.
Customer Due Diligence: From KYC to KYB

Customer Due Diligence: From KYC to KYB

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Why CDD is significant for both Know Your Customer and Know your Business verification?

Banking is a profitable sector but is risky at the same time. Frauds, as well as compliance risks, are often complicated and intricate. The banks and financial institutes are spending a high amount of capital on KYC compliance, which surpassed $100 billion in the year 2019. Even with this much investment, global banks have been fined $321 billion since the global crisis in 2008. Further complicating these risks is the fact that financial crimes such as money laundering, terrorist financing, and cyber frauds are increasing.

On the other hand, regulatory authorities are striving hard to enforce measures that could lead to the eradication of financial crimes. One of the first regulations that were enacted amidst the Vietnam war back in the 1970s was BSA. US regulatory authorities issued the Bank Secrecy Act of 1970 (BSA).

The purpose of this law was to counter money laundering activities emerging from illicit drug trafficking. Under this provision, banks are obliged to report any customer activity that seems suspicious such as transaction above $10,000 to the Federal Financial Crimes Enforcement Network (FinCEN).

The regulations aimed to make it difficult for the drug cartels, terrorists, and other lucrative criminal enterprises to launder money by making their transactions more visible to law enforcement agencies.

Introduction of Customer Due Diligence as Know Your Customer (KYC) regulations


The Banking Act of 1970, laid the foundation for the Anti Money laundering (AML) regulations later in US patriot Act, 2001, after the tragic incident of 9/11. Customer due diligence (CDD) was declared necessary for the financial sector. The term coined for performing CDD is Know Your Customer or KYC.

The KYC regulations were fortified to restrain the flow of money to the terrorists. It requires financial institutes to verify the customer to ensure that they are, who they claim to be. These regulations led to the adoption of various approaches to comply with CDD and KYC laws. Since the US regulatory changes affect the landscapes of the global financial sectors, these regulatory changes were accepted by the banking sector worldwide.

Financial Sectors adopted several ID verification controls to respond to these regulations. These ID verification controls include:

  • Maintaining a thorough Customer Identification Program (CIP).
  • Verifying customers against the list released by Law enforcement agencies.
  • Predicting, customer’s behavior and criminal risks associated with a particular entity, based on the statistical data.
  • Ongoing screening of the transactional activities of suspected customers.

It continues to be the main line of defense for the financial sector against financial crimes, with minor amendments. For a simple person, this law appears comprehensive. However, in June 2016, a loophole was identified in KYC compliance regulations. 

The banks weren’t required to verify the identity of stakeholders and beneficiaries of the businesses they provide services. It was after Panama Papers Scandal the world realized that apparently, legitimate businesses could hide the identities of bad actors and perform illegal activities on their behalf. The regulatory authorities identified the risk and issued a fix as Know Your Business (KYB).

Tying up Loose Ends with KYC Verification


This fix made by regulatory authorities in the KYC checks includes the Customer Due Diligence for the financial institutes. Under the new provision, Financial institutes are now required to perform stringent verification checks. KYB regulations are aimed to identify the shell companies that are involved in money laundering and other illicit financial crimes. 

Firms are required to verify the person who owns the business legally as well as, the identity of stakeholders owning a minimum of 25% share in the business. European Commission also introduced the same legislation in its 4th AML Directive (4AMLD). This process of business verification was improved, with new regulatory changes in AMLD5 and AMLD6, which are aimed to make due diligence transparent.

However, KYB compliance is not easy to achieve as it seems. The major problem in KYB verification is the identification of shareholders in the businesses. Most of the time, no record of these entities is available and to make things worse, the disclosure requirements in each jurisdiction varies. This sometimes makes it impossible to identify the stakeholders in the business. It is a recipe for disaster, for the firms who want to stay in compliance.

Turning towards Technology for Solution 


Emerging from the ashes of the global financial crisis in 2008, the new regulatory technologies are helping to ease the burden of compliance by reducing the operational costs as well as mitigating the risks for financial crimes. At the crux of these technologies, is the use of new technologies such as Identity verification and KYC identification, to help financial institutes to monitor, comply and regulate. The RegTech solutions are already assisting financial institutes to meet KYC and AML regulations.

Businesses need to stay one step ahead of the fraudsters. With a comprehensive approach to global risk mitigation, businesses could easily prevent fraudulent activities and stay in compliance with regulatory authorities. 

RegTech industry is rendering efficient AI-based solutions for Business verification solutions that can eliminate the inefficiencies and risks involved in onboarding new customers. For instance, automation of official document checking process and verification against the government issued registries. 

The future of RegTech is expected to see great adoption in the financial sector in the future. Owing to the changes in regulatory compliance, performing KYC and KYB verification parallelly will enhance the customer due diligence process and businesses to stay compliant.

AML Compliance in EU Member States and Risks of Businesses

AML Compliance in EU Member States and Risks of Businesses

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Making regulations is just the first step, the true game starts when it comes to implementation, the European Supervisory Authorities report gave this clear message. 

European Union regulatory authorities are always in a wake to improve Anti Money Laundering (AML) and Counter Financial Terrorism (CFT) regulations. Currently, the fourth AML directive is in action in the member states of the EU. Europen Union Supervisory Authorities (ESAs) recently gave a joint opinion based on the AML and CFT data collected from the member countries and expressed their concerns regarding the CFT and AML compliance in the reporting entities. 

The member countries are required to give this joint opinion on money laundering and terrorist financing risks in the EU financial sector every two years based on Article 6(5) of (EU) 2015/849 (the 4th AML directive). The ESAs (EBA, EIOPA, ESMA) report showed concerns regarding monitoring transactions and suspicious transaction reporting, cryptocurrencies, Brexit, and the risks associated with operations of businesses that handle a large number of financial transactions. 

Major Concerns of ESAs

The ESAs expressed some major concerns regarding the risks lurking in the financial infrastructure of EU countries. The detailed report contained the data proof of how credit institutions are exposed to more risk as compared to previous years. 

Inconsistent implementation of 4th AML directive


The uniform implementation of the 4th AML directive is a challenge as the legislations in a country are influenced by several stakeholders. The report of Joint Supervisory Authorities (JSA) highlighted that political and regulatory entities in the countries influence the implementation of the EU AML and CFT regulations. The countries often don’t understand the regulations properly and there is a lack of uniformity in the regulations across the EU so it leaves a loophole for the companies that plan to do illegal business. For example, if one country is rigid in AML and CFT compliance then the businesses or the criminals move to other countries with relatively lenient regulatory compliance requirements. So, it affects the effectiveness of AML and CFT regulations. 



The United Kingdom is all set to leave the European Union in some time. The report of the ESAs identified that the firms working in the EU will be affected by this change in the EU landscape. The firms listed in the UK will have to update their operations as per the new UK regulations. Also, the firms outside the UK will have to get themselves registered with the UK as per the new regulations. 

This huge change in the infrastructure will affect the regulatory landscape of the EU. Most probably it will make loopholes for financial criminals. The UK was used by the shell companies in the past, and now this sudden shift in regulations will definitely take some time, so, the criminals are most likely to gain over this delay. 

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. 

Regtech and Fintech


Technology is a freeware that is used equally for fraud and fraud prevention. The advent of Fintech and Regtech definitely improved the operations in the financial sector but it also increased the risk. Lack of regulations and minor regulatory compliance in this sector is the source of risk. Fintech and Regtech are widely adopted by people and are very dear to legitimate users due to the ease created due to these solutions. 

Lack of legal and regulatory understanding among the Fintech and Regtech businesses is a point of concern. The businesses that don’t practice are more likely to fall prey to identity thieves and criminals. The in-depth understanding of regulations and regulatory compliance by Regtech solutions is vital to deliver quality risk prevention, so the businesses should be careful while choosing one such solution. 



Cryptocurrencies are major concerns of the JSAs. Although the AMLD5 and AMLD6 are drafted to address this risk. Lack of regulatory awareness and commitment in the cryptocurrency ecosystem are some major concerns expressed in the report. The EU is also planning to increase the scope of “virtual currencies” to “virtual assets” as per the FATF regulations. This is because there is a lack of awareness among the businesses offering the cryptocurrency services. 

Internal control


The internal controls of businesses are found to be lacking in their internal controls. Some major issues were found are Customer Due Diligence (CDD), lack or suspicious transaction reporting, lack of transaction monitoring, etc. 

Lack of effective compliance 


The businesses in the EU countries are found to be lacking in AML and CFT compliance, the report stated that sanctions screening is not enough. The businesses have to keep an eye on the transactions of their customers as well. Complete reliance on CDD is the loophole in the internal controls of firms. 

Also, businesses are required to practice compliance in a smart manner. In case they completely disown the customers based on the high risk associated with them, it will increase the chances of money laundering in the EU. 

Credit Institutions


The report highlighted that some credit institutions are exposed to major risks due to their business operations. Financial transactions as the key part of their operation so the risk of being exploited by money launderer sand terrorist financiers is high. The businesses are required to practice proactive fraud prevention and CDD. 

To wrap up, the businesses in the EU and outside the EU will be affected by the increased pressure on AML and CFT compliance among the member countries. The businesses from non-member countries will also be affected by this. The EU has also recommended the reporting entities to practice the EU regulations outside the region (Non-EEA states). The Brexit is also expected to happen in the near future so it will also affect the operations, regulatory compliance of the global businesses. Proactive fraud prevention, thorough regulatory compliance, and timely decisions will help businesses in achieving high returns in the future.

Know Your Business: The Next Step in Identity Verification

Know Your Business: The Next Step in Identity Verification

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The complex regulatory environment and increased exposure to illegal activities indicate that business verification is in the best interest of regulated companies eyeing long term stability. According to the UNDOC, money laundering is estimated at 2-5% of global GDP, amounting to almost $2 trillion. Digital data breaches have also increased substantially over the recent past, with rising threats of virtual ID theft.  

In order to counter this, banks are spending more than $48 million on due diligence and KYB processes, with rising onboarding costs, as reported by the Thomsons Reuters’ survey. 

With the advancement in digital technologies and virtual data sets, KYB compliance and verification tools can help mark businesses that are involved in undercover activities and transactions. International requirements of both KYB and AML are increasingly reflecting the need to secure business transactions and prevent illicit financial flows from entering the formal sector. 

The Regulatory Approach to KYB

Businesses face strict regulations that require them to identity and verify customers before onboarding them. The 4th AML Directive, in particular, puts emphasis on stringent audit trails that help prevent fraud and financial crime. For this purpose, Digital Verification Services such as KYC and AML screening have proven to be significantly effective in improving compliance procedures. 

In a similar tune, regulatory requirements, such as the AMLD5 directive, now demand strict evaluation of both individual clients and commercial entities before carrying out business with them. This is to ensure that financial institutions and other businesses can avoid being connected to illegal transactions conducted by their clients. 

Money launderers often get under the cover of businesses and the EU is rolling our stricter regulations for customer due diligence to stamp out aggressors. For regulated companies, this translates into a legal compliance requirement for which the adoption of a duplicate screening process for suppliers, vendors and traders becomes important. Other regulations such as the GDPR, PSD2, and FinCEN also require companies to be aware of the Ultimate Beneficiary Owners (UBOs) of entities before beginning a relationship. 

According to new registration demands of the AML directive, all EU states are required to maintain national registers of beneficial ownership information on corporations and other legal entities. All companies and their owners now have to get their details registered, making it all the more easy to identify individuals involved in illegal activities through a business. Information of such regulated businesses will be made available to companies with a legal interest in business relationships.

KYB Process 

Similar to KYC, Know Your Business (KYB) is a Verification Solution that cross-checks business identity by extracting official commercial register data using APIs. Using a business’ registration number and jurisdiction code, an efficient digital KYB service can collect verifiable information for the business. 

Access to automated commercial registers through a data-powered business verification service make the due diligence process swift and free of errors, while saving valuable time and manpower. 

Business Search 


This includes background data on the company: registered address, current status, company type, UBOs, previous name, trademark registration. A financial summary of the company’s operational accounts is also provided by the authentication service, in order to better validate its authenticity. 

Business FIlings


In addition, business filings offer instant, verifiable information about company financials; access to financial statements, sources and links to downloadable reports (such as register reports, annual accounts and shareholder lists). 

Business Statements 


Business statements can help companies stay on top of changes in management and organisation of connecting businesses. A change in directors or beneficiary owners can also reflect an evolving business environment, indicating the need for followup information on business matters. 

Business Networks


Detailed information on corporate structure also provides insights into parent entities and lists of company subsidiaries (child, sister companies). Key factors under consideration are also based on the country in which the business is registered, the nature of business activities and the value of transactions it carries out. 

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Challenges in KYB


By far, one of the foremost challenges in KYB compliance lies in accessing beneficial ownership information, especially in jurisdictions that do not require companies to submit relevant documentation. A lack of shareholder information can make it harder to investigate money trails and business authenticity, leading to potential non-compliance costs. 

Timely availability of data, in the right format, is also another hindrance, especially as company structures and management change over time. Storage and interpretation of data is also subject to a number of factors, mainly centering on companies adopting a manual approach to due diligence processes. 

Moreover, companies that are currently implementing KYC processes have ample room for improvement in process efficiency, costing banks millions of dollars in lost time. It follows that digitization of KYB verification solutions will also be a tedious process of hit-and-trial before firms can grab its full potential. 

Business Verification: Moving Forward


When it comes to risky transactions, regulatory authorities are not ready to bend their rules. The 6th AML Directive is also ready to be implemented soon, which indicates little or no leniency for financial institutions or businesses in the coming future. Therefore, KYB is central to the efficiency and transparency of firms doing business. 

Data analytics software that aggregate and updates information about businesses assists stakeholders in keeping tabs on their operations and practices, as well as fulfilling due diligence requirements of KYB.

As a one-stop solution for business verification, Shufti Pro offers a cost-effective solution of due diligence review of companies. With an electronic identity verification (eIDV) service, the authentication process for business entities is made easier and more accurate. The integration of APIs and data-driven systems now allow easier extraction of data, as well as smoother coordination mechanisms for compliance review. 

Transparent B2B Relations 


As a pre-emptive measure, businesses can use KYB solutions as fraud covers in case of a breach. Using the right mix of technology and support, full coverage of business financials and organizational structure can be accessed in order to trace business activities. This also allows firms to maintain updated company databases for better workflows. 

Business reputation is also incumbent upon due diligence processes that are reliable and foolproof. As a consequence, identification and verification of the beneficial ownership of connecting entities is vital to solving verification challenges.

Effortless Regulatory Compliance


A user-friendly interface allows businesses to fulfill regulatory compliance needs without any friction. Potential losses and non-compliance penalties diminish productivity for firms willing to extend their business networks. Reputational damage is also a leading cause of business failure when it comes to carrying out business with suspicious entities. 

With a comprehensive approach to risk mitigation, online KYB authentication services provide strong risk-shields against such losses, securing long term benefits for all concerned parties. 

Initial CCPA Compliance Costs Could Hit $55 Billion: Report

Initial CCPA Compliance Costs Could Hit $55 Billion: Report

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According to an economic impact assessment prepared for the state attorney general’s office by an independent research firm, California’s new privacy law could cost companies a total of $55 billion to get in compliance. Total CCPA compliance costs are likely to vary considerably based on the type of company, the maturity of the businesses’ current privacy compliance system, the number of California consumers they provide goods and services to, and how personal information is currently used in the business.

CCPA provides sweeping privacy protection to California’s residents. It includes a provision that will allow consumers to know what data companies are collecting on them. The bill grants rights to California residents to be informed about how companies collect and use their data, and allows them to request their personal data be deleted, among other protections. It represents the start of a new era of privacy laws designed to protect personal data, says Kelsey Finch of the Future of Privacy Forum. CCPA’s section gives consumers the right to delete personal information from the company’s database. 

CCPA Affecting Businesses :

CCPA will affect three types of businesses based in California:

  • Companies that have gross revenue of at least $25 million.
  • Companies that buy, sell and share the personal information of 50,000 or more consumers, households or devices.
  • Companies that get 50 percent or more of their annual revenue from selling consumers’ personal information.

By estimates, companies with less than 20 employees have to pay $50,000 for compliance. Large companies having more than 500 employees will have to pay an average amount of $42 million. This will make up for 1.8% of California Gross State Product. According to a report, total compliance costs for the companies subject to the law could range from $467 million to more than $16 billion over the next decade.  Researchers estimated that as many as 75% of California businesses earning less than $25 million in revenue would be impacted by the legislation. States have begun to take efforts for privacy legislation. Facebook CEO Mark Zuckerberg advocated for creating a nationwide policy in this regard. Cost and complications will be lessened by setting one legal standard for tech firms than a piecemeal approach to compliance. 

Since many businesses in California that operate in Europe had to make changes to comply with the GDPR which went into effect last year, CCPA has taken some elements from GDPR. The research suggests that the compliance costs for California’s law will be reduced this way. The EU estimated average incremental compliance costs for the GDPR would total about 5,700 Euros a year (nearly $6,300), according to the report, though there is also evident that the regulation lost productivity in sectors that rely heavily on data. Smaller firms are likely to take on a disproportionately larger share of compliance costs compared to larger firms with GDPR.

CCPA- An Inherit Part of GDPR:

Over a year after the introduction of the GDPR, concerns regarding its impact on larger firms appear to have been overstated, while many smaller firms have struggled to meet compliance costs. Resources explain this dichotomy as large technology companies are often several steps ahead of both competitors and regulators. In the long term, however, it is believed that the differential impact will likely shrink, driven in part by competition among third-party services that will help small businesses comply with the legislation. 

Economic Impact on Companies:

Companies are going to face an economic impact due to CCPA. As smaller companies with less than 20 employees are expected to spend about $50,000 in initial CCPA compliance costs, while mid-sized firms with between 20 and 100 employees could incur costs of $100,000 to start, according to the study.

The expenses come at a time when companies are reaping big rewards from the buying and selling of personal consumer data. The use of personal data in online advertising is a $12 billion annual business in California. When combined with the buying and selling of information from data brokers, the number rises to $20 billion annually.

California businesses could spend an additional $16 billion over the next decade after initial compliance expenses to keep up with changes and other expenses, according to the report. Those expenses could include hefty fines for those who violate the law.

A recent report from the International Association of Privacy Professionals found that as of this summer, only 2 percent of affected businesses were fully compliant with the law.

Meanwhile, some other state legislators are using California law as a model. In Nevada, for instance, a new privacy law went into effect on Oct. 1. That law, known as Senate Bill 220, will give consumers more ways to keep websites from selling personal data.

 Businesses that need to comply with CCPA:

Following are some businesses that have huge private data that needs to be protected by CCPA:


  • E-Commerce:


Online businesses have a huge private date of which they are taking advantage. The user surfing through the internet is analyzed by AI-based products and products of their interest are shown to get him attracted. This means that user data is being used to get more sales of their desired products by advertising it. So CCPA will enhance the privacy policies of businesses across the globe. The so-called rights over consumer data will be exploited by CCPA.


  • AI-based Verification Services:


As the regulations regarding KYC and AML are becoming more stringent businesses are adopting identity verification services for their customers and for other businesses. For this, they have huge data of clients that they have to verify. Identity verification service providers have the most confidential data on hand, hence they must follow the provisions of the California Consumer Privacy Act.


  • Social media:


Social media plays a vital role in their shopping decisions. Its a platform to target audience of interest. According to a study, 87% of shoppers are satisfied with the shopping experience through social media. There are many social media marketing tools that are employed to get to the audience of interest and to improve the sales of a particular product. Businesses are aware of these tools and deploying them well. The use of these marketing products employe available information on social media platforms. Social media sites have to change their practices of selling the personal information of users to third parties. The consent of the user must be required for selling this data to a third party business.

So, businesses need to comply with CCPA for the protection of private data of consumers. Since many California businesses had to comply with Europe’s General Data Protection Regulation last year, some of the compliance costs for the new state law will likely be reduced, according to the report’s authors. Many businesses need to comply with CCPA to mitigate the risk of a data breach. The law will go into effect on Jan. 1, 2020.

Face Verification –  One Solution for Several Identity Frauds

Face Verification – One Solution for Several Identity Frauds

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Biometrics is the technology that verifies the unique personality traits of a person to identify him. Biometrics include face verification, eye retina screening, voice recognition, and fingerprint scanning. All types of biometric verifications are used widely for customer onboarding, security protocols, regulatory compliance, phone unlock, etc. 

Face verification bears huge potential for businesses. The businesses are required to run complete KYC and AML screening on their customers and face verification is a feasible real-time solution for thorough compliance. Other than that, face verification helps businesses in fraud prevention, customer onboarding, customer verification at the time of making transactions, verification of vendors and other businesses in B2B or B2C relationship. Biometric Verification is like by consumers as well, a study found that 74% of consumers believe biometrics are safer and more secure than businesses. 

Businesses in financial, non-financial, e-commerce, legal, retail, etc. all can utilize face verification for above mentioned benfits. 

One of the major threats to businesses is the people connecting to them with fake identities. Such fake identities can take several facets to defraud businesses. Below is a list of some major fraud scenarios that are conducted through fake/stolen identities. 


  • Stolen Identity


Criminals steal the identity of a person, by using his ID card, driving license, or account credentials to access his account, to get free services entitled to the original person, to execute illegal acts. This is one of the most common crimes that hit businesses of all types and sizes. The reason why such businesses are required to practice KYC and AML screening on their stakeholders. 


  • Fake Identity


Criminals make fake identity cards and other identity documents that neither belong to any real person nor are issued by some authority. Such cards often appear real to the naked human eye but if screened through document verification software they are identified as a fake one within seconds. Because the human eye could be manipulated through look alike QR codes but an AI-powered software could identify such frauds within seconds. 


  • Synthetic identity 


Synthetic identity is a type of planned fraud. In this case, the criminals build a new (synthetic) identity by using some of the original information and some fake information. As per payment frauds insights (2019) of federal reserves, synthetic identity fraud is the fastest-growing fraud in the united states. Also, synthetic identities are created by using the identities of children, homeless and elder people, because such identities remain unused for a long time. 

Synthetic identities often get them past weak security protocols, especially when manual verification is adopted or the software only verifies the ID card number and does not verify the originality of the identity document. Synthetic identity is not like “fake identity”, because it is a combination of fake and original identity. This lethal combination makes it difficult to identify a synthetic identity by just verifying the ID card number. It requires a thorough screening solution that verifies the document, face, and the ID card number simultaneously to identify a synthetic identity among the original identities.


  • Ghost Identity


This is also a type of stolen identity but of a dead person. Criminals use the identities of dead people to develop synthetic identities and to get free benefits that were associated with that person, e.g. pension, insurance, etc. Ghost identities could also hit all types of businesses, government organizations, banks, insurance companies, etc. 

Face Verification is the Ultimate Solution

Face verification is one of the dearest biometric technologies of this age. Why? Because it is easy to use, integrate, and is becoming more refined with every passing day. It is proved time and again that face verification along with document verification is a feasible solution to detect all types of identity frauds. The process adopted in the face recognition solution does not leave any loophole for criminals. 

Face matching

The face verification process screens a person’s face in real-time and matches it with the face on the identity document (the document is already verified through “document verification” solution). If a criminal is using a stolen, fake or synthetic ID card he would be identified at this stage as a criminal could steal the identity but he could not steal someone’s face. 

Liveness detection 

Face recognition technology detects liveness through minor facial movements. The AI-based system detects minor movements like the blink of an eye, smile, etc. So there are no chances that a  criminal could show a picture of a person, a printed photo, etc. In the case of video verification, the user is asked to take a selfie video and to make some facial movements like a smile or blinking eyes. The AI-based system detects the movement and verifies that an original person is making the verification. 

3D depth perception

This feature leaves no loophole for fraud, as the picture or video uploaded by the end-user is screened for unique facial features. In case a criminal has developed a synthetic identity by using the ID card number of a person with alike facial features, 3D depth perception will detect the minor difference in the facial features so, identity theft will be detected at the very first stage. 

3D depth perception detects the face image for unique facial features shown in the photo in an identity document. Also, it screens the depth on the contour points and edges of the face to detect a picture taken from a paper-backed photo or photoshopped images. 

To wrap up, face verification is the ultimate solution for several needs of the businesses. Face verification delivers highly accurate results within a minute. The easy integration of such solutions is easy ad swift, making regulatory compliance, customer onboarding, and fraud prevention an easy affair for global businesses. No matter how many facets a criminal changes to get into a business’s system face verification eliminates all such attempts at the very first stage. 

Global Economies are joining forces with FATF against money laundering

Global Economies are joining forces with FATF against money laundering

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Financial Action Task Force (FATF) has been very keen on eliminating financial crime (money laundering, terrorist financing) at a global level. The regulatory authority recommended some major changes in  AML (Anti Money Laundering) practices and screened the AML practices of some of its members (direct or indirect) and also, added new countries in its member’s list. 

FATF is one of the most influential global financial regulators. It has 39 complete members and several members under its affiliates (APG, CFATF, EAG, etc.) around the globe working on a thorough implementation of AML regulations. FATF is always keen on eliminating money laundering from all the countries and territories. Numerous industries including financial and non-financial sectors are added to the scope of reporting entities of FATF recommendations. 

In a wake to ensure global compliance, FATF is always in search of loopholes in AML and CFT (Counter Financial terrorism)  regulations and compliance practices of the member countries. Regular screening of AML practices of its member countries is a part of its operations. 

In 2019 as well, FATF took some vital steps to expanded the scope of its regulations to a global level and to cover the gaps between global AML regulations

Saudi Arabia Became the First Arab Member of FATF


FATF expands the scope of its regulations to a global level by adding new members. Becoming a member of FATF requires the country to fully comply with FATF recommendations making it almost impossible for criminals to exploit it. 

Saudi Arabia is setting standards for the Arab and Middle eastern countries by becoming a member of FATF. the country was practicing the global AML and CFT regulations for the last four years. Also, in March 2019, it was about to be blacklisted by FATF, but missed it closely and now becomes full member of FATF.  

Financial institutions and businesses offering any types of financial services will be liable to comply with global AML regulations. This means the latest AML recommendations of FATF regarding cryptocurrencies and the legal sector will also be imposed on the reporting entities in Saudi Arabia. This initiative of Saudi Arabia will bring more business into the country as it is identified as a safe country by fully complying with the 40 recommendations of FATF. Meanwhile, the businesses in the country will be under the strict scrutiny of the regulatory authorities. 

It is high time that businesses in Saudi Arabia should identify the crucial need to practice complete AML compliance.

Pakistan in the Greylist 


FATF keeps an eye on its member countries by screening their efforts to eliminate money laundering and terrorist financing. Pakistan is a member of the Asia Pacific Group on Money Laundering (APG) and was under the scrutiny of FATF since 2018. The reason behind this scrutiny is the terrorist attacks in India. It was claimed by the Indian authorities that the terrorist activity was executed by a terrorist group in Pakistan. Also, the Panama Papers placed a question mark on the AML and CFT practices of Pakistan. The regulatory authorities in Pakistan are required to take proactive measures recommended by FATF to be removed from the grey list. 

In 2019, FATF made an analysis of the AML practices of regulatory institutions in Pakistan.  The decision has to come regarding, whether Pakistan will be added to the blacklist or not. 

It shows that FATF does not ignore any kind of non-compliance by its member states. In order to maintain the good image of their country, the member states are always in a wake to adopt stringent practices to enforce AML compliance in the business sector (financial and non-financial). Because becoming a member of FATF of just the first step, the countries have to go through regular screening of FATF and need to maintain a crime-free financial infrastructure in the country. 

So, the businesses in full member countries and indirect-member countries are in dire need of practicing complete AML compliance. As non-compliance will lead to dangerous consequences like huge fines and loss of credit rating, loss of credibility, etc. 

Changes in FATF Regulations


FATF gives recommendations whenever it finds a loophole in global AML and CFT regulations. In 2019, the authority gave some major recommendations to its member countries. 

FATF recommended AML compliance for the cryptocurrency and legal sector in 2019. The legal sector is required to screen the Ultimate Beneficiary Owners (UBOs) of the entities they represent. 

Also, the cryptocurrency businesses are required to practice AML and KYC compliance just like the financial sector. 

The reason behind these new recommendations is the increase in fraud in these sectors. Cryptocurrency is widely exploited by financial criminals at a global level. According to a report, $1.1 billion of cryptocurrency was stolen in 2018. On the other hand, the legal sector is also exploited by money launderers to incorporate their black money into the business proceeds of shell companies. That is why the legal professionals are required to verify the identity of UBOs of business entities they are serving.

FATF also recommends the art dealers and precious metal dealers to practice KYC screening on their customers and to report transactions above the predetermined threshold. 

Why Do Businesses need to Practice AML Compliance?



The businesses in the financial and non-financial sectors are covered in the scope of AML recommendations of FATF. Operating in countries that are full or indirect members of FATF, the businesses are obliged to practice thorough compliance with global AML regulations. Harmful consequences follow the non-compliance practices of businesses. 

Non-compliance could result in fines, loss of credibility, credit rating and market value, and in some cases complete shutdown of the non-compliant entity. For instance, take the case of the Danske Bank’s Estonia branch which was closed due to a huge money-laundering scandal. Also, the bank faced several lawsuits and huge penalty. 

The recent efforts of FATF show that the entity will leave no rock unturned to eliminate money laundering at a global level. So, it means that businesses have no other option but to take proactive measures against financial crime. Running real-time KYC and AML screening on the customers before onboarding them eliminates the risk at the very beginning. It enhances the credibility and credit rating of a company along with proactive fraud prevention. Such steps will help businesses in gaining a competitive edge. Hence, such proactive measures create a win-win situation for businesses.

Identity Verification Fuels Growth of Ride Sharing Industry

Identity Verification Fuels Growth of Ride Sharing Industry

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The ride-sharing industry is growing at a huge pace. As per Orbi’s research, the ride-sharing industry-valued $51.3 billion in 2017 and the anticipated growth rate is 20%. The industry is expected to grow at a huge pace and to gain a value of $220.5 billion by 2025. Many ride-sharing businesses are operating around the globe and use in-house measures to cater to fraud, but commonly the businesses prefer outsourcing such services. Biometric verification through face recognition is one of the common solutions utilized globally for identity verification in real-time. 

With the industry becoming a multi-million dollar firm, the risk of loss is also, multimillion-dollar. Not all ride-sharing businesses are using real-time verification which has left loopholes for fraudsters and criminals. A most common source of risk in ride-sharing comes from their drivers and partially it comes from the passengers. AI-based solutions for identity verification and geo-location screening helps in catering to the risk of onboarding criminal drivers, who might affect the credibility of the company. 

The reason behind the growth of the ride-sharing industry is the rise in vehicle and fuel prices. More and more people are moving towards ride-sharing as compared to buying their personal vehicles because it is cost-effective and time-effective aswell. Another reason behind this tremendous growth is the trust of people in this industry. 

The driver of a vehicle working under the sticker of your company depicts your company and its values. So, in-depth screening of the drivers is vital, and one-time screening is not enough as the risk is a constant factor in this industry. Continuous verification through biometric screening is a feasible solution to mitigate the risk of fraud in the ride-sharing industry. 

What Is Online Identity Verification?

Online identity verification is the process of identity verification of an individual (rider/driver) in real-time using artificial intelligence. Artificial Intelligence (AI) and the latest technologies are used to verify the identity of a person in real-time. It performs the verification and delivers the results within 30 seconds. 

Frauds in Ride Sharing Industry that can be Addressed with Online Identity Verification

Fake drivers

Criminals with intentions to rob the riders or to kidnap them are also prevailing among the legitimate drivers that applied for working under your company name. The criminals use fake identities to register as a driver for robbing the riders. Whenever a driver registers with a ride-sharing company he is the ambassador of that company in front of the riders. In case a criminal is registered as your driver, it will affect the credibility of your company. Word of mouth is very important in such industries, one bad experience will multiply and will lead to a loss of customers in the future. 

Drivers Renting Out Their Cars

Often the drivers register with a company and rent out their car to some other driver, who is not verified by the company. Companies perform basic security measures on registered drivers, so if someone else will drive the registered car, it will risk the riders and the company’s value. So, continuous verification of drivers before every ride is necessary, to secure the interest of riders and the company. 

Fake Complaints From Customers

Often the customers prove to be a source of risk for the ride sharing company. The customers might say that the driver did not pick them up or the wrong driver was driving the car. In case of real-time verification performed by the rider, the company will have the backup of verification results. If the company will have performed verification on the location of drivers, they will be able to show that the rider made verification and was dropped to the predetermined destination. 

Benefits of Using Real-time Identity Verification

In order to mitigate this risk of onboarding fraudsters and criminals, the businesses need to run in-depth identity verification on their drivers, before hiring them. This is the very first step, it should be entended to regular verification. Every time a driver takes a ride, ask the rider to verify the driver through real-time face verification. 

Exceptional User Experience

It helps the businesses in delivering seamless onboarding experience to the clients. Online identity verification can be performed within 30 seconds and will leave a positive impact on the client regarding the concern of the company towards their clients’ security. 

After a few incidents, the ride sharing industry faced a lot of bad-fame that is why people prefer those services that practice visible security measures. But they do not want to spend a lot of their time on verification and security protocols. So, real-time identity verification helps in achieving several goals through one service. 


Not every ride-sharing business has the budget of developing an in-house security system, especially if it is a startup. Outsourcing is a feasible option with regard to low cost. The verification plan can be developed according to the cost appetite of the company. No pre-planned packages. 

Precision in Results

The precision rate in online identity verification solutions is high. Shufti Pro delivers 98.67% precision in its identity verification services. It helps businesses in reducing false positives and onboarding only credible drivers. 

Easy Integration

The integration of online identity verification solution with the system of the business is easy and frictionless. The API integration can be performed within minutes and does not require any expensive technology for the installation of the software. So, fraud prevention can be achieved within minutes. 

How Is Face Verification Performed in Real-time Identity Verification?

Face verification is performed in real-time using artificial intelligence. First of all the integration of identity verification API with the system of the ride-sharing company is completed. The app or website of the ride-sharing industry is used by the riders to perform verification on the driver.

The driver shows his face to the camera and real-time verification is performed by mapping the facial features and liveness detection. Once the verification is performed, results are shown in real-time to the rider and a backup is created in the back office provided to the company. The back office maintains complete verification results. 

So, conducting real-time identity verification and face verification on the drivers every time they take a rider will help the businesses in retaining happy customers. Security is the major concern in ride sharing and using identity verification helps the rides sharing industry in gaining credibility among the customers. It will also enhance the face value and profits of the businesses, by retaining happy customers. 

Biometric Verification – Shaping the Future of Payments

Biometric Verification – Shaping the Future of Payments

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Today’s world is no longer different from the science fiction world. With the advent of technology, automation and artificial intelligence are transforming society. Biometric Verification technology is becoming a reality for businesses and industries dealing with finance. It doesn’t only have a significant impact on the payment industry but on the whole consumer’s industry in general as well.

The global explosion of technology is challenging the traditional methods, whether it’s about opening or accessing an account, verifying and authenticating individuals or making online transactions. The businesses need an improved, efficient and secure technology to compete with other organizations, meeting the customer demands. AI technology is continuously evolving and becoming more advanced and reliable for payment transactions. 

The global explosion of mobile payments

The evolution of technology and automation have led businesses towards the global expansion of online and mobile payments. The trend of cardless payments and cashless society is on the rise. According to Biometrics research group inc. report, the worldwide mobile payment transactions are expected to reach $750 billion by 2020, with more than 700 million users. Taking into account the growing trend of online payments, the security concern is even more vigilant. 

In online businesses, passwords and pin-codes are well-practiced authentication tools that have been used for years. However, bad consumer behavior is making these methods vulnerable to cybercriminals. For instance, people use too plain and simple passwords for their accounts, sometimes the same password for multiple platforms. As per a study conducted, only one-third of the respondents were using unique passwords/pin codes for their accounts. Whereas, two-thirds were using the same credentials and that too more than once. Such practices provide a golden opportunity for cybercriminals and fraudsters to exploit the identities of users and carry out fraudulent activities.

With the introduction of biometric technology especially, face verification, these problems are likely to become a thing of the past in upcoming years. Biometric authentication to approve a transaction or payment will eliminate the security concerns and secure the whole payments process. In fact, some big fishes are already opting for this new technology to the 

Biometric Adoption on the Rise

As the world is moving towards the fourth industrial revolution, huge amount of money in commerce investment is pouring, eventually expanding the e-commerce industry. The rise of card-less and mobile payments is driving industries towards the transformation of payment and authentication processes. Many organizations are already adopting biometric solutions to enhance the security of their payments and businesses; some examples of renowned business are:

  • Online retailers Ali Express and Amazon are exploring biometric technology through facial scanning. Also, amazon’s “smile to pay” feature is taking payment and customer experience to another level.
  • Apple Pay is successfully embracing a popularized use of biometrics, specifically fingerprints. Android Pay and Samsung Pay are following the suit as well.
  • Mobile Banking applications, Fintechs, and Credit Card Pay are also incorporating fingerprints and facial recognition for secure payments.
  • MasterCard is exploring novel ways to enhance payment methods, in fact, they are introducing an extensive identity check app “Pay through face” for the transaction.

These organizations are creating a tough competitive environment for other businesses which is pushing them to adopt biometrics for secure and enhanced customer experience.

The benefits of Cashless Payments

As technology is evolving, the cashless mobile payments and online transactions are becoming more fast and convenient. To say biometrics play major role in taking industries along the road of smart payments won’t be an understatement. With enormous advantages and a competitive edge in the market, biometric verification is the fastest adopted technology. At first, the biometrics were limited to fingerprint scanning but over the last few years it has vastly improved – today, modern biometric solutions can recognize voice pitches, retinal scanning and even facial recognition and emotion reading through facial scanning. 

Increased Security

The trend of online payments has grabbed the attention of intruders and fraudsters. They are always looking out for vulnerabilities to exploit user accounts. The traditional binary authentication method (user ID and Password) is no longer secure and easily hackable. A face verification solution provides an increased and efficient security check for online businesses. Biometrics are the unique features of an individual that can’t be stolen or compromised. 

Moreover, according to a report, almost one-third of consumers and business owners accept that this new technology will lead to more secure and safe payments. 31% of the business owners claim that they feel safer with new payment tech as it reduces the chances of frauds and they would have less cash on their premises. Therefore, biometric verification is quite significant in verifying the users, that too in real-time

Improved Customer Experience

Apart from the perspective of mobile payment, paying through biometrics is much more convenient. Just by the touch of their fingerprint or showing the face in the camera rather than typing complex passwords on small screens. Also, biometrics eliminates the hassle of remembering the passwords. According to the 2017 visa study, 70% of the respondents think biometrics are easier than passwords and 46% of them find biometrics more secure. 

Every day businesses are striving to be on the top. With the consumers’ attitude of welcoming speed and convenience, organizations want to meet the customer’s demands. Henceforth, adopting biometrics technology for fast and secure payments and enhanced customer experience makes complete sense.

Reduced Fraudulent Chargebacks 

The explosion of technology and the increasing trend of online shopping have resulted in a higher ratio of digital frauds and chargebacks. Due to a lack of proper verification services and relying on traditional authentication methods, fraudsters are getting an upper hand in compromising user identities and making fraudulent transactions leading to chargebacks. Every year retailers and merchants lose millions due to fraudulent chargeback claims. In 2016, the e-commerce industry suffered a loss of around $6.7 billion and 71% was due to chargeback fraud.

Face verification at the time of checkout confirms the remote presence of individuals and records the proof of verification. Verifying identity in real-time helps in combating the fraudsters, hence reducing chargeback frauds.  

Added check to meet Regulatory Compliances

The ever-growing digital fraud and identity theft cases have urged the government and regulatory agencies to take necessary steps for the prevention of online frauds and protect user identities. All the organizations dealing with money whether online or not, are enforced to meet know your customer (KYC), Customer Due Diligence (CDD), and anti-money laundering (AML) compliance. The failure to do so can land businesses into severe problems like hefty fines and even imprisonment.

Understanding the importance of meeting compliance, organizations are readily adopting the AI-powered verification services, biometrics being the most effective one. Not only for verification but biometric technology is a competent solution for authentication and a key element in securing the online transactions.

Fintech Trends – Unlocking the Unmapped Potential

Fintech Trends – Unlocking the Unmapped Potential

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Fintech, a blend of two words Finance and Technology, represents the collision of two worlds that how technology is revolutionizing the finance world. This industry has significantly evolved over the past few years. According to The Fintech Ecosystems report, it has reached to a new height in 2018 hitting the market value of $32.6 billion.

The investors are already in the race of reaching to the top by overcoming the gap between technology, incumbents, and ever-growing customer expectations and demands. They are continuously launching new products and services to diversify technology scores, eventually earning tremendous investments. Several studies and researches are being conducted to analyze the upcoming potentials associated with financial technology and how it would reshape the landscape. 

4 Segments of Fintech

Finance and technology are firmly gripping each other to come up with a strong market presence. The aggregate investment figures reported in 2018, encompasse different patterns of developments. The financial technology industry covers a range of industry models operating in different niches, segmented into four distinct variants. 

  • As new Entrants

Financial technology start-ups look forward to adopting the latest technologies and approaches to enter financial services. Such firms target a particular niche or product with an intent to develop an economic model similar to banks’.

  • As Incumbent Financial Institutions

These institutes significantly invest in technology to improve their performance, user experience, and meeting hostile threats. Moreover, the aim of these institutions is to capture competitive partnership and investment opportunities.

  • As Ecosystems

Financial Technology as ecosystems systemized by developed and large-scale companies offer financial services not just to enhance the existing platforms but also to monetize current user data and relationships. For example, “AliPay” supports Alibaba’s e-commerce platform. Leveraging robust user-engagement, such financial technology organizations offer relatively less customer acquisition cost as compared to other firms.

  • As Infrastructure Providers

These institutes offer/sell services to other financial institutions for digitizing their technology stacks and risk management and improving customer experience. 

Challenges for Fintech Variants

The future holds something big for these financial technology variants and of course, the hurdles are going to be there to reach their ultimate goals. For example, currently analyzing the market, the success of the infrastructure providers depends on the product and technical capabilities. Whereas, customer-oriented startups firmly focus on customer acquisition costs.

For Incumbents, the most challenging part is related to organizational skills and practice just like investing in technology. Convincing an employee, comfortable with traditional methods, to shift to digital can be agonizingly slow. The established technology businesses trying to enter the financial technology ecosystem may face regulatory challenges (KYC and AML compliance etc.). Unlike the advertising industries, the financial industries are quite timorous in adopting the “move fast and break things” approach. which makes them conscious about developing such integrated financial services.

Global Financial Technology Trends

Cloud-Based Solution to Settle the Fintech Market

Cloud computing is now helping financial institutions like banks to digitize their operations and become more accessible to customers, eventually reducing overhead costs. The main advantage is that it eliminates the need for specific and dedicated hardware and software and other resources required to maintain it, overcoming investment costs. As per the study, the cloud-based solutions are all set to lay foundations for how banks and other financial institutes are going to manage, conduct and grow their business in the future.

The organizations are now integrating and using cloud-based SaaS (software as a service) applications to enhance and innovate their non-core business processes e.g HR, CRM and accounting. Moreover, the cloud has paved its way into areas like KYC verification and AML screening for security analytics. In fact, according to digital trends 2018 report, the fast-paced financial institutions are three times more likely to invest in cloud-based solutions and technology. To say, cloud solutions are going to settle the financial technology market offering greater flexibility and efficiency won’t be an understatement.

Artificial Intelligence to Address Complex Issues

The buzz surrounding AI-powered applications and services in Financial Technology is intense. Traditional financial institutions are leveraging this advanced technology to enhance their operations. Approximately 20% of the organizations have already started utilizing AI, and more than 40% are looking forward to implementing it in the near future. Furthermore, up to 25% of the banking activities and operations are expected to be performed by AI-powered machines. One example of such a leading player is JPMorgan Chase. It is utilizing the COIN- Contract Intelligence machine learning program to automate the legal documentation reviews and reducing the human-effort and cost. 

Similarly, other institutions are also using AI-based identity verification and KYC services to speed up the onboarding process and eliminating frauds. AI is certainly a great influence on the customer’s experience and potentially reducing the cost of certain operations. Financial technology industries will see more usage of advanced machine learning and modeling techniques in upcoming years to deal with more complex business processes.

Investors are becoming more Selective

With the financial technology boom gaining ground, investors are becoming cautious and selective. Though there is no impact on overall funding, however, the investments in early-stage startups have significantly decreased by more than half between 2014 and 2017. The technology investors are looking for more reliable, later-stage financial technology institutes that can promise substantial scale and profits. This will give a tough time to startups and companies with no defined path for monetization, to meet with the rising funding demands.

Some institutions are no doubt, successful in raising sums but still, they are facing hurdles in monetizing their products. The reason is customer adoption of innovative business models takes time. For instance, blockchain start-ups are attracting customers and venture capital because of new payment infrastructure. However, because of being in prototype mode and leap to revenue-generation, the incumbents are cautious about blockchain startups. 

User Experience is not enough

The explosion of technology has pushed banks and financial institutes toward digitization. Looking back to the days of traditional banking, financial Technology captured the market by building a decent mobile application with great user experience (UX). But now it isn’t easy anymore since most organizations have transformed their user experience. Now every bank is offering a fully remote, mobile functionality with a classy design to win over customers. 

Customers now want more reasons to switch to new financial technology offers rather than great user experience.

The partnership between Global Banks and Fintech expected to grow

As technology is rapidly advancing, the thin line between financial technology and financial institutions is blurring due to their increasing partnerships. The increasing trend of financial technology has raised an unknown fear in global financial institutions. They could lose a significant market share to financial technology innovators. To cope up with competitive pressure, global banks are looking for ways to invest in financial technology companies. In fact, with direct collaboration, the partnership between global banks and fintech is expected to grow in the upcoming years.

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Fintech Trends

The Reason Why Companies Painstakingly Screen Customers

The Reason Why Companies Painstakingly Screen Customers

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Remote identity Proofing:  generally believe that more customers bring more revenue. But that is not always the case. Sometimes getting more customers can, in fact, mean fewer profits or even a loss. This article looks at the reasons why businesses take great care in acquiring customers.

Screening by Insurance Companies

Let’s start with the striking example of the insurance industry, or health insurance in particular. Selecting the right pool of customers is crucial for them. They need to maintain an acceptable level of risk in their pool of customers. A person living a healthy lifestyle would bring a lesser risk to the pool. On the other hand, a person that frequently eats junk food and does not exercise brings additional risk.
From a business perspective, the less risky customer is more desirable. If the insurance pool contains more customers carrying less risk, the payouts or insurance claim would be less frequent. Conversely, a pool with a higher number of customers that live an unhealthy lifestyle means that the insurance company would have to pay claims more frequently.
Therefore, it makes perfect sense why companies invest considerable time and effort in screening customers.

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An Example of Bad Screening Process

Say, an Insuretech firm (an insurance firm that primarily relies on tech innovation to earn revenues) uses the strategy of entering the market by providing insurance cover to those people that have been rejected by other insurance companies. This will not be a sound marketing plan.
The people who have been rejected by other insurance providers are likely to be carrying high risk. This would translate into frequent payouts (cash outflow) for the novice Insuretech company. They need good customers that pay their premiums consistently and are less likely to file a claim.
Another angle to look at this business equation is that when a company accepts more of ‘bad customers’ (high-risk individuals), it puts the burden on the good customers to increase their premium amounts. Business needs to generate consistent profits. Hence the emphasis on devising a strategic customer selection criterion.

Ethics Should be Part of the Business Strategy

Be it insurance or manufacturing, ethics play a critical role. For example, if a screening process results in a rejection list that contains more people of a certain race, demographic or ethnicity, this could be construed as discrimination. In some cases, the company might even incur a penalty under the law. Yes, it is not easy, unintentional breaches occur as well.

Using Machine Learning for Remote identity Proofing

Companies can use machine learning to screen customers. Consider a database where the management is setting filters for screening. For example, they might set the minimum income threshold of 120,000 euros to sell life insurance cover. But with machine learning, they might input ‘apparently’ uncorrelated elements such as if they take the bus to work or use carpooling. These parameters are neutral.
But even an apparently harmless filter such as ‘the number of rooms in their house’ could result in a rejection list that might indicate discrimination. Machine learning, data science in particular, can reveal correlations between elements that would not make sense to humans.
Strong coordination between data scientists and compliance can be a win-win. Companies could screen customers more effectively and still remain compliant.
In fact, businesses can refine their screening process by using compliant AI and machine learning screening. This is cost effective as well due to remote identity proofing. Real time identity proofing process refines the onboarding process for companies.
Screening customers is time consuming but when done effectively, the rewards are plentiful. Businesses do not just want every customer out there. Onboarding needs to be carefully aligned with the business goals while remaining compliant to regulations.

6 Digital Solutions for Banks to Help with KYC

6 Digital Solutions for Banks to Help with KYC

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Digital KYC: For banks, streamlining the customer onboarding is essential. The manual way of entering client information into the system is redundant and time-consuming. In this age of ‘do it now’, banks need a tech-based approach for onboarding customers.

Also, technology alone can’t solve these problems. Its implementation needs to be strategic, logical and customer oriented. For example, banks need to comply with regulations such as know your customer (KYC), and the customers want swift and easy interaction with the banking system. AI-based digital solutions can help both the banks and the customers.

Read How Digital KYC Solutions Work in 60 Seconds

Problems Banks Currently Face in Onboarding

According to a KPMG report, a tier 1 bank could easily be spending about $100 million annually on onboarding clients. Despite spending this much, this manual process is error-prone, slow, risky (due to lack of regulatory compliance) and does not enhance the client experience. 

The majority of the problems associated with client onboarding are related to the outmoded manual onboarding. For example;

  1. Manual form filling and questioning are time-consuming.
  2. There is an ever-increasing demand for transparency by the regulators. Keeping up with these demands is arduous.
  3. The process is complicated and slow from the customer’s perspective.

The solution to such problems should consider three main factors; the business side, regulatory compliance, and modern technology. Coordination among these three pillars will exhibit the benefits of digital KYC. 

Here are 6 Digital Solutions to help with KYC

  • Face Verification

Simply put, the user takes a selfie with their smartphone or with a webcam. The software (digital KYC solution provider) ascertains the physical presence of the individual. AI-based methods can differentiate between a picture and a live face using 3D depth perception and color texture. This prevents spoofing attacks. Contemporary solution providers use micro expressions for verification as well.

  • Document Verification

With the camera of a smartphone or computer, the software scans documents for verification. Normally this includes verifying government-issued ID cards, passports, or driver’s license. Smart solutions determine the authenticity of documents and ensure that they are not tampered with. They also check for the format to assure that the document is original. For example, besides checking the apparent format of the passport it checks the machine readable zone (MRZ), which is usually located at the bottom of the identity page.

  •  Address Verification  

Verifying the physical address is a crucial part of the customer’s identity. It acts as a solid deterrence against identity theft. By ‘reading’ the government-issued documents such as ID cards, digital KYC solutions authenticate that the document is genuine, and the address mentioned on it is not forged or tampered with. The best services offer hybrid solutions; first, the document is verified by the machine, then, a trained person ensures that the verification is error free.

  • Two Factor Authentication

The combination of phone and internet is used in the two-factor authentication. The user simply enters their phone number into the app or software, then, a code is sent to their phone. The user is then requested to enter that code into the web interface to authenticate.

  • Anti Money Laundering (AML) Screening 

Banks not only have to ‘know their customers’ but they also have to perform due diligence before they doing any form of business with them. They need to screen them to ensure that they are not listed on the anti-money laundering watch list. This service is also available to banks in a digital form. The best solutions out there update their database every few minutes, so that when they screen, it cross-checks with the most recent data. 

  • Knowing Customers through Customized Documents

Smart digital solutions are capable of reading handwritten notes and custom documents. This is achieved through optical character recognition, which is powered by AI and machine learning. Digital KYC verification is an impetus for comprehensive due diligence. 

Despite the various benefits, tech-based solutions alone are not enough. The integration needs to make business sense for banks. KYC – digital or manual – needs to be in compliance with the regulations. The majority of banks spend huge sums of money on compliance but still, come short on many fronts. Third party services are a cost-effective and feasible option; compliance is met and customers get fast and easy communication with the banks.

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6 Digital Solutions for Banks to Help with KYC

What Due Diligence Means for Your Business

What Due Diligence Means for Your Business

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Due diligence is a process that helps banks and individuals to get to know in detail who they are dealing with. Sometimes it is mandatory and other-other times voluntary. This article looks at the concept of due diligence implications for your business and includes a due diligence checklist to help you with compliance 

What exactly is Due Diligence?

When a business is about to sign an agreement or buy a product, it investigates the party to the deal and the product. It is a ‘measure of prudence’ or an attempt to ‘perform a prudent review’. A more common form of referring to the same is customer due diligence (CDD).

Types of Due Diligence

There are different forms of performing due diligence, each has its own merit. The process depends on the risk level and purpose. Here is a short list of the types of due diligence;

  • When Buying a company – To check if a company is legally and financially secure before buying
  • M&A due diligenceMergers and acquisition (M&A) due diligence is performed when businesses are merging or one business is planning to acquire another
  • Financial due diligenceIt is to investigate the financial health of an asset before purchasing
  • Customer due diligence (CDD)Businesses perform CDD to ensure that the customer is not involved in illegal activities or funding terrorism 
  • Commercial due diligencePrivate equity firms readily perform this diligence to test the commercial viability of a business
  • Vendor due diligenceWhen a business is about to be sold it requests a third party to perform an audit for the financial health of the business 
  • Third Party due diligenceA firm looking to outsource its services undertakes 3rd party due diligence to evaluate the risks


Does Law require you to perform Due Diligence?

Due diligence is a subset of ‘know your customer’ (KYC), which is mandatory for all registered banks and financial institutions. The digitization of banking services is expanding the list of businesses obligated by law to follow the due process. For example, the emerging industries of Fintech, Wealthtech, and Insurtech are a few names.

The law is stricter with financial institutions and asset management companies when it comes to performing due diligence. If you own a fund such as a mutual fund or a hedge fund you will have to perform the due process irrespective of the amount of investment an investor brings in. 

Similarly, the trend of ICO’s and cryptocurrencies has attracted the attention of the regulators in recent years, making due diligence mandatory in all developed economies of the world. It makes perfect sense, no one should be allowed to launder money through ICOs and tokens. 

How do You carry out CDD?

Here is a checklist to help your business achieve CDD;

  • Perform due diligence before you enter into any business with your customer. It is quite difficult to deal with risks afterward
  • Verify your customer’s identity
  • Verify the address of your customer
  • Screen third parties (your business partners, banks, lawyers, etc. also carry risk)
  • Collect all the necessary information, store it professionally (for example, high-risk clients should not mix with low-risk profiles)
  • Be vigilant in identifying profiles that might need enhanced due diligence (EDD)
  • Organize and manage the records as neatly as possible, make a digital copy

What if You do not perform Due Diligence?

There are two ways in which you could come short; not performing due diligence and inadequate due diligence. Both carry serious risks. 

For example, if an investigation reveals that your business did not perform due diligence, and allowed a person to open an account with your bank, who is listed on the Anti-money laundering (AML) blacklist, you might have to pay a hefty fine.

In addition, your business repute might get tarnished, causing irrecoverable damage. Other investors and customers might avoid doing business with you. You might also face hurdles in expanding your operations into other countries.


Due diligence might be required by law for your business. Even if it is not, it is wise to investigate who you are dealing with. Businesses not only perform due diligence before onboarding customers but also before entering into a contract with other businesses. 

However, the demands of regulatory bodies are tightening. Compliance is already a top priority for businesses associated with the financial industry. Many firms find it more feasible to get professional help regarding compliance. It frees up their resources for the core business.

How Blockchain is Making the World a Better Place

How Blockchain is Making the World a Better Place

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Verify identity: The whole world lives online now. Yes, that’s an exaggeration but we are gradually moving there. Every day millions of people connect with the internet to research, shop, comment and to pay bills. The more a person interacts online the more concrete their digital footprint. 

How Blockchain Can Resolve Identity Management Issues

What’s Wrong with Online Money Transaction?

Most online transactions require a person to give identification before proceeding. If you have purchased items on Amazon, used PayPal or Google Pay, you know the drill. Usually, these companies ask you to answer personal questions. 

Answering questions is not the problem, where they store them is.

Every time someone interacts with the internet this way, they leave that information on the web. Your digital identity creates clones on different platforms (wherever you interact), which is a security risk. Hacking of Equifax was one such episode where personal data was hacked. This event and many others expose how vulnerable the system is.

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How can Blockchain Help?

Blockchain offers security. It lets individuals and businesses create a peer to peer network. They can exchange information or currency through it. It also allows individuals to create digital identities or self-sovereign identities which are difficult to steal. 

What is so special about Blockchain? Democracy!

Master nodes are a possible solution to verify identity online. Master nodes democratically select a node to verify the user. Similarly, they can verify documents. Nodes are the soul of the blockchain.

There are three types of nodes;

  • Node: Send and receive transactions
  • Full node: Whatever the node does plus it keeps the copy of the entire chain
  • Master nodes: It has the power of the full node plus enables decentralized governance and budgeting. It’s the master.

Your Digital Identity is in Safe Hands with Blockchain

Blockchain basically creates your digital identity or a digital watermark that can be affixed to all your online transactions. Hence any unusual or suspicious transaction will not be approved since they won’t be wearing your digital watermark.

Blockchain not only secures your Verify identity but also helps secure the clones. Which means that you are more secure transacting online if it exists on the Blockchain. You get more freedom about your identity. The companies also get more control in who they approve or include in their blockchain network. 

Speed Up customer Onboarding with Online Facial Recognition

Speed Up customer Onboarding with Online Facial Recognition

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Banks are spending loads to digitize their operations. The competition is mounting, plus, people are downloading non-banking apps to buy and transfer money. This is forcing banks to compromise and share customer data with Fintech companies. But speeding things up can create security problems. Online facial recognition can help banks take customers onboard much faster without compromising security.    

What is facial recognition software?

It is a biometric software that uses facial recognition to ‘map’ a person’s face. It stores facial features as mathematical data called the faceprint.

Usually, such software uses deep learning algorithms to match a live or digital image with the saved faceprint (learn the basics of how facial recognition software work).

Google’s Image Search

With the Google image search engine, you can find matching images online. Simply go to the image search bar, click the camera icon and upload your desired image. Searching this way will show you the matching or similar images.

Facial Recognition can help Banks Get More Customers

Financial regulatory authorities want banks and similar firms to onboard only those individuals that they know.

This knowledge has a technical meaning. For instance, banks should know the profession of a person that wants to open an account or invest in a company. If illegal money is stored or transferred or invested through them, they are responsible.

Know Your Customer

Know Your Customer or KYC is a compliance process that helps banks to officially know their customers.

Although the specifics of KYC vary from industry to industry, however, the main features are;

  • Customer Acceptance Policy
  • Customer Identification Procedures
  • Monitoring of Transactions
  • Risk management

Conventional KYC requires a lot of paperwork. By making KYC electronic (e-KYC), banks can streamline the otherwise lengthy process. Naturally, the online verification of biometrics will be extremely useful here.

Which Banks are using Online Facial Recognition for Customer Onboarding?

In early 2019, New Zealand’s ASB ran a pilot project to onboard new customers online. They removed the obligation of visiting a branch. Not surprisingly, they used biometric facial recognition technology.

ASB’s technique was basic. The bank matched customer’s pictures with their uploaded driver’s license.

Spain-based France’s Boursorama Financial Services Group plans to run a similar process through its subsidiary Self Bank. The difference from ABS will be the use of video-conferencing. The basics (biometrics and electronic signatures) will be the same.

Besides big names, a huge number of Fintech firms have been using online verification for some time.

How does facial recognition Help in KYC Compliance?

Customer identification is the core of KYC. Physically, the facial recognition is performed the way the security at the airport; they match your face with the picture on your passport.  

Technology does the same but faster. You might open an account at a bank using just your phone. This would require you to open its camera and show your face, then, upload a government-issued ID.

Recognizing facial patterns, in-depth 3D sensing, detecting liveness and texture, machine learning algorithms will match your face with the one on your passport, driver’s license or other official documents.

Will online facial recognition reduce processing time?

Yes. The conventional mode requires so much paperwork. Online verification might reduce the processing time to mere minutes, especially if banks are using contemporary artificial intelligence algorithms.

Looking forward…

We want things fast. Imagine your browsing speed slows down by a mere second, you will feel it. The same goes for banking services. We want transactions today, purchased items delivered the same day if not within the next hour.  

Banks should and will be using digital face recognition in the near future on a massive scale. This will not only help accelerate onboarding new customers but it will also assist the existing customers to log in to their accounts securely.

Banks need to speed things up while maintaining due diligence. Those that will efficiently manage both will excel, the rest will bite the dust. This is why banks are either readily buying the budding Fintech companies or developing software in-house that can assist with ID data and biometrics.

Why is Libra Cryptocurrency The Most Trending Thing Right Now?

Why is Libra Cryptocurrency The Most Trending Thing Right Now?

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The universe of crypto revolves around an aversion to a central financial authority. The financial crash of 2008 made people skeptical of central banks. And the rising popularity of cryptocurrencies vindicates it. But now Facebook has announced to launch its own crypto coin, the Libra Cryptocurrency, which is not as decentralized as the more conventional cryptocurrencies.  

Overview of Facebook Cryptocurrency

Facebook has announced that it will launch a cryptocurrency, Libra. People could send each other money over Whatsapp and Facebook Messenger, and purchase items online with it.

The reason for launching it – as mentioned in Libra’s Whitepaper – is to bring 1.7 billion people into the financial ecosystem which are not currently part of the conventional banking system.

With Facebook’s reach, it seems possible.

But it is important to know that Who is actually backing Libra?


Libra is primarily backed by the Switzerland-based Libra Association. It is also supported by the likes of Mastercard, Visa, PayPal, Stripe, eBay, Uber, Lyft, Spotify and Coinbase, among others.

Despite this strong alliance, there is a problem, trust, or the lack thereof.

If you do not trust the central bank and the federal reserve system then why would you trust Visa and MasterCard that are backing Libra coin?

This duality is obvious in Libra.

On one hand, it is using blockchain technology but it is not an open ledger, yet. This, perhaps, is to keep the network secure considering the security breaches of cryptocurrency exchanges we have witnessed in recent years.

Mark Zuckerberg on the Security of Facebook Libra Cryptocurrency

Mark Zuckerberg, the CEO of Facebook, understands security concerns. In a recent Facebook post, he specifically addressed this issue, “Privacy and safety will be built into every step… Libra will be regulated like other payment service providers,”.

The prevalent nature of Whatsapp and Messenger creates suspicion regarding the privacy and security of online transactions. Zuckerberg added;

“Any information you share with Calibra will be kept separate from the information you share on Facebook.”

What is Calibra?

Calibra is the e-Wallet or virtual wallet for the Libra coin. According to the official Facebook news source it will be available on Whatsapp, Messenger and as a standalone app.

Since there is a significant emphasis on the security of Libra’s functionality, it is unlikely for it to operate without KYC compliance and AML compliance.

How Libra Cryptocurrency is Different

Permissioned blockchain

Here is an excerpt from Libra’s Whitepaper;

“It is built on a secure, scalable, and reliable blockchain […] It is backed by a reserve of assets designed to give it intrinsic value, and it is governed by the independent Libra Association tasked with evolving the ecosystem.”

One way to look at Libra is that it is similar to Bitcoin as it is a digital currency that runs on the Blockchain, and offers smart contracts, much like Ethereum. Many are considering Libra more similar to Ethereum than Bitcoin.

Libra’s structure contains all the main features of Ethereum; the account model, generic language, gas, on-chain scaling with sharding among others.

The Good

We have already seen so much chaos in the world of cryptocurrencies that a name such as Facebook seems like a good addition. The breach of users’ private data through Facebook did not deter its two billion users. On top of that Libra is a stable-coin. 

The Bad

Security is a major concern. The real reason behind the potential abuse for Libra is crooked developers. Facebook intends to allow anyone to build apps on Libra’s platform in the future. The escapade of Cambridge Analytica which resulted in the breach of 87 million people’s personal data is still fresh.  

What Libra Means for the average Facebook User

If you are a happy user of payment system such as PayPal or Skrill, Libra might not mean much for you. But those people are not Facebook’s target audience.

The real market for Libra are the people sending money to their loved ones from abroad. This also includes the 1.7 billion people that are currently outside the realm of traditional banking. That perhaps is the biggest target market as far the cryptocurrencies are concerned.

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