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Russian govt introduces Fintech Sandboxes, including Blockchain

Wilbur Rodgers
March 25, 2020
3 minutes read
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The Russian government plans on the creation of regulatory sandboxes for companies working on contemporary technologies like artificial intelligence and distributed ledgers. Prime Minister Mikhail Mishustin introduced the bill on March 17. The plan does not directly talk about blockchain or cryptocurrencies, but an explanatory note describes distributed ledger as one of the technologies that could be explored in the recent “experimental regulatory regimes.”

Russian Prime Minister Mikhail Mishustin has introduced a bill to allow the creation of regulatory sandboxes for firms working on cutting edge technologies like AI and distributed ledgers. @baidakova reports https://t.co/7hh0InMceq

— CoinDesk (@CoinDesk) March 24, 2020

Such rules are initiated to test the technologies in many different sectors including medicine, transportation, distant learning, financial markets, online commerce. The document states that the bill provides Russia’s regulators with the ability to deal with unconventional technology in a better way. Furthermore, some of the country’s regions would be able to set up their own local sandboxes as well.

The Fintech related sandboxes will be supervised by the Bank of Russia and the Central Bank. Fintech projects functioning within sandboxes would be subject to lighter regulations regarding cash reserves, financial reporting, and foreign currency controls, as reported by the Representatives of the Economic Development Ministry.

The bill should already have been passed as part of the government’s program on developing the digital economy in Russia but there were concerns that such a law would distort the power balance in favor of the executive branch to a large extent, according to Olga Shepeleva, a senior expert at the Center for Strategic Research.

She stated, “The main idea is that the government can choose to make temporary exceptions from laws and regulations for the sandboxes.” The Bank of Russia has already been operating a regulatory sandbox for fintech projects and has even tested a blockchain-based tokenization pilot with the assistance of the mining and smelting company, Nornickel.

However, the central bank’s sandbox only assists in framing the possible uses of the new technologies, but does not permit businesses with the ability to test their use cases on real clients; neither does it provide the means for expert and public control over such experiments. Shepeleva further explained that the new bill will allow the creation of sandboxes in which real businesses will be working with real customers.

Russia’s central bank has persistently sustained a skeptical attitude towards cryptocurrencies and has recently announced that it is involved in drafting an act that will obstruct the crypto markets from functioning in the country, though ownership would likely be tolerated. Mikhail Komin, research director at the Center for Advanced Governance in Moscow stated, “For sure, the [coronavirus] pandemic and the financial crisis makes the government look for unorthodox solutions, but crypto is not a part of that.”

“The Bank of Russia is interested in lowering uncertainty in the financial and foreign currency markets caused by the volatility of the Russian ruble, and it believes cryptocurrencies would add even more uncertainty,” Komin said. “The Bank of Russia’s position remains winning one in this argument.”

Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

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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

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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

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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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Russian govt introduces Fintech Sandboxes, including 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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Russian govt introduces Fintech Sandboxes, including 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.