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Scammers Set to Defraud this Holiday Season, FBI Warns!

Richard Marley
December 18, 2020
2 minutes read
3701

This holiday season, New Mexican shoppers are at risk of facing scammers. Criminals are all set to exploit this holiday season. They are prepared to steal the personal information of the people and use it for their own benefit.

FBI’s IC3-Internet Crime Complaint Center, New Mexicans have lost a total amount of USD 18 million in the past because of various scams. These scams range from phishing attacks and identity theft to shipping scams.

“Because of the COVID-19 pandemic, more people than ever are expected to shop online this year. . . Unfortunately, that means more potential victims of holiday scams. The FBI urges consumers to be vigilant and protect themselves against criminals looking to make a quick buck.” James Langenberg, Special Agent in Charge of the Albuquerque FBI Division, said.

FBI is working towards making the holiday season secure for the public as well as the retailers. One of the most common types of scams that can occur is an online shopping scam. Sites offering unrealistic sales are a way to get money out of people. Scammers sometimes get wire transfers from people which immediately gives criminals access to illegal funds. The identity of the person and their credit card information is also stolen through phishing attacks. Both, the victim of identity theft and the retailer, have to face the consequences of the shopping done by an identity thief. Money mules emails are sent to people that promise easy money with no effort. Through this, people are manipulated into transferring illegal funds. This can get them in trouble with the law and they can get charged with money laundering crime.

FBI warns the people of such crimes and requests them to take cybersecurity seriously. Entities are asked to enhance their cybersecurity measures and people are warned to only shop on legitimate sites with good security measures.

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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Lawyers in Malta Lag Behind in Complying with AML Measures
Malta obliged the various sectors to comply with risk assessment measures. According to the Financial Intelligence Analysis Unit, the legal industry is lagging behind in complying with these measures.

Only 57 per cent of the legal businesses had a system for business risk assessment (BRA) in place the previous year which places the legal industry at the bottom of the list of sectors for compliance requirements including credit institutions, gaming companies, service providers, auditors and accountants.

However, FIAU is driven to gain more compliance management measures from the listed sectors. The overall results indicate that the improvement was seen in every sector as Malta continues to focus on its fight against money laundering terrorism funding.

Business Risk Assessment is a tool through which the members of the financial services can analyse the risks attached to a client and which measures can ensure minimized risks. This tool is a part of anti-money laundering compliance.

FIAU reported a significant improvement among real estate agents that shot up to 73% from 40% in a year regarding the Business Risk Assessment.

Credit institutions made it to the top of the list with a 100% increase in having the Business Risk Assessment in place and the financial institutions made it to the second with 94%.

“The FIAU acknowledges the subject persons’ commitment to engage consultants to assist them in carrying out certain anti-money laundering and financing of terrorism obligations. However, subject persons remain solely responsible for the BRA and most importantly should ensure that they have knowledge of both the content and result of it,” the FIAU said.

The FIAU highlighted that the BRA must not be a side document that the operators are required to fulfil. It must be tailored to represent the business operations, scenarios, and models.

The financial watchdogs revealed that a number of operators took the help of consultants to carry out the risk assessment and they were responsible and understood the importance of the exercise.

FIAU analysed one risk assessment and discovered that “An operator listed the application of client due diligence (CDD) measures as a safeguard against risks arising from exposure to politically exposed persons (PEPs).” FIAU added, “This is not sufficient given that CDD measures are to be applied in all circumstances irrespective of the risk level. In cases PEPs, subject persons are expected to define in more detail the type of enhanced due diligence measures to be applied.”

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Periodic to Perpetual KYC — The Changing Landscape in Banks
The employment of effective Know Your Customer (KYC) procedures has long been a challenge for financial institutions, resulting in investments worth billions of dollars and numerous non-compliance penalties for major industry leaders. To counter the complexity and inconvenience of conventional methods of identity verification, KYC procedures must evolve in a way that lowers down the cost for a company while also maintaining regulatory compliance.

The Current State of KYC in Banking

In a traditional set-up, KYC processes are implemented on a periodic basis, with the frequency of the reviews varying between every financial institution. However, a significant amount of deficiencies within the traditional periodic KYC process have reinforced the need for a transition.

But before we get to that, let’s take a look at what happens in a periodic KYC review process.

What is KYC Periodic Review?

Periodic KYC involves the simple procedure of submitting the latest identity and address documents to the bank. This is initially done when the customer opens a bank account and the information is then updated at periodic intervals.
The Periodic KYC Process

Typically, compliance officers review the following elements during the periodic AML and KYC process:

Review of the customer’s information: This includes collecting and verifying their full name, date of birth, address, ID number, and the collection of the customer’s original ID documents to identify any material changes

Screening of the customer against global and country-based watch lists and sanctions

Reassessment of risk ratings in case of substantive changes in the ID documents (e.g. a different residential address)

Periodic review of the customer’s transactions and comparing it against forecasted account activity (this is generally performed via fully automated identity verification and screening tools)

Detection of potentially suspicious activities

Pinning Down the Problem

Responding back to periodic KYC data requests made by the bank drives customers crazy if handled incorrectly. At times, customers are even required to show up in person to have their documents verified. For most businesses, the emergence of artificial intelligence-backed identity verification solutions has eliminated the need for such manual methods of document verification. Nevertheless, a high amount of inefficiency still remains.

KYC experts are often caught up between the expectations of the bank and the customers. Repeatedly requesting for additional documents results in unsatisfied and frustrated customers — a situation that can prove to be detrimental to the financial well-being of a company.

With the bar on compliance being globally raised, the costs and resources associated with secure customer onboarding and periodic KYC checks have increased exponentially. Because of this, KYC procedures are often placed at the bottom of to-do lists, which ultimately harms the bank in the form of hefty non-compliance fines on top of reputational damage.

Is There An Alternative?

A basic solution to overcome the above-mentioned problems is to analyze the KYC process from the perspective of the customer i.e., the KYC procedures within a bank must be designed in such a way that the experience of the customer is optimized.

With the help of digital strategies – such as online customer portals, support for multiple channel communication, and direct engagement with bank branches or relationship managers, the inherent friction in obtaining the necessary customer documentation can be substantially reduced.

Further improvements in the efficiency, productivity, and customer experience can be gained by shifting from periodic KYC reviews to perpetual KYC.

What is Perpetual KYC?

In the perpetual “know your customer” process, also known as ongoing KYC, the information of the customer is updated based on specific triggers or events, rather than on the specified amount of elapsed time. Triggers for perpetual KYC can be determined by the bank’s internal KYC policies. Typically, it includes any event that indicates outdated information.

Once combined with robust KYC verification tools, customers can be engaged in the KYC process in a manner that makes sense to them and is not deemed as burdensome.

By gathering updated customer data on an ongoing basis, risk profiling can be enhanced which allows a bank to particularly focus on the customer accounts where the information or circumstances are changing. Additionally, whenever minor non-material changes occur, AI-powered automated processes will be updating records continuously.

What Makes Perpetual KYC Standout?

Due to ever-increasing AML and KYC regulations, having accurate and up-to-date customer information has become more crucial than ever. If banks aim to sustain themselves in a highly competitive market, they need to adopt a data-driven approach and perform ongoing KYC verification on their customers. The benefits of perpetual KYC include but are not confined to:

Mitigation of Friction in the Customer Relationship

For periodic KYC, relationship managers act as the middlemen. They are responsible for requesting current information and additional paperwork from customers and communicating this information back to KYC compliance officers. Repeated requests and resulting transaction delays, however, cause customers to feel dissatisfied with the bank’s customer service. This can result in long-lasting damage to the relationship.

Moving towards perpetual KYC procedures can eliminate this friction by greatly minimizing requests from clients. Customer information is updated based on event-based triggers, rather than a pre-defined period of time.

Risk Reduction

Imagine a scenario where a bank has onboarded a low-risk customer. In periodic KYC, their information is refreshed once every five years. After one year has passed in the five-year review period, this individual is nominated as the director of a firm and becomes a UBO. In addition, that firm’s parent company is domiciled in a high-risk territory. Unless the customer communicates this change to the bank, it may be left undetected for another four years. This can potentially increase the risk of financial crime exposure of the bank.

On the other hand, if this same bank had shifted towards perpetual KYC, the change in the customer’s circumstance would have been identified in mere seconds. Consequently, it would have initiated an immediate review and an updated risk assessment.

Key Takeaways

In a traditional set-up, KYC is implemented on a periodic basis

Periodic KYC has now become insufficient due to higher costs and lower levels of customer satisfaction

Perpetual KYC has the ability to fill these gaps and provides an edge in the form of risk reduction and elimination of friction

Scammers Set to Defraud this Holiday Season, FBI Warns!

The Current State of KYC in Banking

The Periodic KYC Process

Pinning Down the Problem

Is There An Alternative?

What is Perpetual KYC?

What Makes Perpetual KYC Standout?

Mitigation of Friction in the Customer Relationship

Risk Reduction

Key Takeaways

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

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Scammers Set to Defraud this Holiday Season, FBI Warns!

The Current State of KYC in Banking

What is KYC Periodic Review?

The Periodic KYC Process

Pinning Down the Problem

Is There An Alternative?

What is Perpetual KYC?

What Makes Perpetual KYC Standout?

Mitigation of Friction in the Customer Relationship

Risk Reduction

Key Takeaways

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

Add to your Homescreen!