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Brazil’s financial regulator launches regulatory blockchain

Wilbur Rodgers
April 14, 2020
2 minutes read
400

The Banco Central do Brasil (BC) recently declared the launching of a new blockchain platform called PIER (Platform for Information Integration of Regulatory Entities). It allows quick exchange of data between regulatory authorities relating to financial institutions.

Brazil’s Central Bank @BancoCentralBR and the Brazilian SEC @cvmgovbr launched a #blockchain

To share information about regulated financial institutions

Includes insurance regulator
Pension regulator also planning to joinhttps://t.co/y2LARukAA3

— Ledger Insights (@LedgerInsights) April 13, 2020

Until now, the solution is under process with the Central Bank, Brazil’s Authorities the Comissão de Valores Mobiliários (CVM), and the Private Insurance Superintendence (SUSEP). The National Superintendency of Complementary Welfare (PREVIC), the pension regulator, is initiating tests to use the platform.

The shared information includes sanctions against financial institutions or their employees, registration status, financial performance, and details about the employees of regulated firms and key stakeholders. In the future, there are chances of having information from the judiciary, trade boards or international financial bodies.

The financial institutions’ queries can take about a month to process. Regulatory authorities communicate with each other through physical mail and data has to be accessed from other sources to reply back. By enabling automation, the central bank stated PIER could substantially reduce this time. This means the regulators would be able to quickly respond to queries from institutions and companies.

“This makes it possible to drastically reduce the time period for assessing requirements and relieves participants from attending to requests for information that previously required manual procedures,” said Daniel Bichuette, Deputy Head of the BC’s Financial System Organization Department.

Additionally, the blockchain traces all queries made.

“PIER makes the access to information of participants regulated by these institutions (regulators) broader, safer and more direct, strengthening and reducing the bureaucracy of the tasks of supervision, investigation, and investigation of irregularities in the sphere of each one,” said Frederico Shu, Analyst of the Development Center in Data Science at CVM.

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Multi-Tier Security - Another Line of Defense Against Bank Account Scammers
The banking sector has been witnessing a significant rise in criminal activities is a major concern of security authorities these days. The latest reports revealed that banks have been violating KYC and AML regulations and there were skyrocketing penalties in 2020. Protecting banks and customers is necessary and identity verification is one of the best ways of doing so. However, conventional methods like manual document verification do not suffice for the needs. There must be more robust and automated systems like digital identity verification and video KYC that can enhance the efficiency of the process.

A single line of defence does not work when it comes to technologically advanced fraudsters. There must be layers of security to filter them no matter how hard they try to surpass ID checks. Hence, multi-tier security is what the banking sector needs. Multiple layers of security checks and identity verification methodologies will make it impossible for fraudsters to enter banks.

What is Multi-Tier Security?

Multi-tier security refers to multiple layers of identity verification to enhance security in organisations. Fraudsters are developing sophisticated ways of fulfilling their malicious intent and a single layer of security cannot help companies. Therefore, there must be multiple layers of ID verification that can prevent fraudsters from entering the business.
A Summary of Bank Scams and Frauds

Over time, many different types of frauds and scams have struck the banking industry. Due to advanced technology, not only banks are streamlining their processes, but criminals have also figured out techniques to execute their plans. Many new breeds of scams have surprised organisations, especially banks. Let’s take a look at some of the fraudulent activities.

Account Takeover Fraud

Account takeover (ATO) refers to the fraud in which criminals get illegal access to bank accounts and use them for illicit activities like money laundering and chargebacks. As technology advances, fraudsters have also become sophisticated in committing account takeover fraud. There was a 43 per cent increase in account takeover fraud during the global lockdown in 2020. The numbers are expected to increase this year as well due to rapid digitisation.

New Account Fraud

A new breed of frauds struck the world a few years ago by the name new account fraud. With time, the rate of this fraud has increased and defeated all other kinds of scams. For a new account fraud, fraudsters use stolen, forged, or synthetic identities to open a new bank account, get a new credit/debit card, or loan money from the bank. According to Javelin Strategy, 3.2 million customers were affected by this fraud alone in 2018.

Identity Theft

Identity theft has been a threat to businesses for a very long time. The numbers are continuously increasing and banks are the primary target. Unfortunately, identity theft has taken various forms as well, including child identity theft, medical identity theft, and social identity theft. This enables criminals in making purchases, opening new bank accounts, and enjoying numerous other benefits with false names.

Data Breach

Data breach is a social engineering technique that fraudsters use to acquire customer information. The stolen data is later used for bank account scams, identity theft, and numerous other illegal activities. The identities stolen from a data breach are also used for new account fraud. Around 8,000 data breaches were reported in 2019. In the first half of 2020, 540 data breaches were reported only in the United States according to Statista.

Biometric Authentication – The Additional Security Layer

Biometric authentication is the additional layer of security that not only enhances the level of security, but it is also a rigid measure that fraudsters cannot dodge. Fooling biometrics is not a piece of cake for criminals because biometric authentication requires the live presence of the individual for identity verification. Voice, face, palm, iris, pupil, and retina are some of the biometric traits of an individual that are required for biometric verification.

Biometric verification employs various artificial intelligence models and the following techniques are used for authentication:

3D depth analysis

Micro-expression analysis

Skin texture analysis

Liveness detection

All these techniques ensure the live presence of individuals and any spoof attacks or deepfakes can be identified within seconds.

How will Multi-Tier Security Help Your Bank?

Digital identity verification is a multi-tier security measure that your bank needs. This system has multiple methods of verifying identities that prevent fraudsters from entering the business. Here is how the process of multi-tier security works:

First, the individual has to register on your bank’s website for the identity verification process

Along with the registration details, government-issued ID documents are also submitted

Then, the information submitted is verified with the government-issued ID document

Once the documents are verified, biometric authentication comes in action and face verification checks are performed

Customers have to submit their selfie or video during verification which is matched with the image on the ID document

Lastly, consent verification checks are also performed in which the customer has to submit a handwritten or typed consent note

Conclusion

All in all, verifying identities with the manual method is not an adequate option in the digital world. Digital identity verification is an automated process of verifying identities with layers of security to increase the efficacy of the process. One of the strongest layers in this method is biometric authentication that ensures the live presence of the customer for verification. Fraudsters cannot bypass these checks through any of their techniques. Due to the robustness of this technique, bank account scammers fear from the additional layers of security to verify identities and transactions. Identity theft, account takeover fraud, new account fraud, and data breaches are some of the criminal activities that have increased over time. Now, banks need a multi-tier security system to ensure the security of the customers as well as the organisation.

Get in touch with our experts and learn more about the digital ID verification system and biometric authentication.

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Brazil’s financial regulator launches regulatory blockchain

A Summary of Bank Scams and Frauds

Account Takeover Fraud

New Account Fraud

Identity Theft

Data Breach

Biometric Authentication – The Additional Security Layer

How will Multi-Tier Security Help Your Bank?

Conclusion

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

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Brazil’s financial regulator launches regulatory blockchain

What is Multi-Tier Security?

A Summary of Bank Scams and Frauds

Account Takeover Fraud

New Account Fraud

Identity Theft

Data Breach

Biometric Authentication – The Additional Security Layer

How will Multi-Tier Security Help Your Bank?

Conclusion

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.