Business Verification: A new line of Defense against Fraudsters

Business Verification: A new line of Defense against Fraudsters

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

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

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

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

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

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

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

Main Drivers of Business Verification Services

Artificial Intelligence

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

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

Future of Know Your Business Verification

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

BlockChain Technology

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

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

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

KYB know your Business

Know Your Business: The Next Step in Identity Verification

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. 

Find more resoures on business technology

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. 

Social Media identity Theft Frauds

Social Media and Identity Theft Frauds

Imagine this: You get up in the morning and like most people; check your email. There you have an email from an old friend of yours. He is like, “hey bro everything alright in Hawaii? Did you get your credit card and access to the rest of the services. I hope the money that I sent reached you? Do let me know if you need any further help” You look at the email, you’re in shock as initially you can’t understand what to make of this email. You frantically look up your friend’s number and call him. When he picks up you ask him about the email he sent. Before anything else he asks about how you’re doing and if things have gotten better. You tell him that you never asked for any money and neither did you go to Hawaii on vacation. There is silence on the other side and he says, “Did you set up another Facebook account?”
You tell him no and he informs you that a couple of months ago he received a friend request from you and he accepted it since he had not seen any updates from your other account. So thinking that it was you he added you up. He also said you were keeping quite up-to-date on your new profile and a week ago you mentioned that you are travelling to Hawaii. He went on to say That a couple of days ago he received a message from you saying that your smartphone, credit cards and cash had been stolen. You tell him that you have not used Fb in ages and ask him to share the account. He tells you that you have been a victim of identity theft. You open your email while talking to your friend and he has sent the email including the link to the fake profile. You open it up and as you look through it you see the person has impersonated you and posted pictures from your profile including those from your trip to Hawaii 4 years ago. You tell this to your friend and he laughs nervously, he tells you that he had heard of such a social media scam, but he never thought he would be a victim of one. He tells you to check your privacy settings and inform Facebook. He lets you know that he will also contact Fb and inform them of the identity theft fraud. You end the call by telling each other that we should be in touch more often and communicate on a better medium than social media. You hang up the phone and as you go through the stolen profile you realise that a lot of your friends have accepted the friend request from the fake profile and you anxiously think how many were sent this message…

Social Media Identity Theft A Growing Threat

Although the story above talks about a hypothetical incident, but the fact is that identity theft on social media is a reality. The worst part is that it is getting more and more common. As banks and other financial institutions are able to identify fake credentials and individuals. The scammers are turning to the social media platform to steal the identities of real individuals to carry out their criminal activities. Some even use the social media to carry out fraudulent activities similar to the one mentioned above. Almost 3 in 10 people have witnessed or been affected by identity fraud. Given the statistics this number could rise even more if some sort of measure is not taken by such sites to deter social media scam.

Can ID Verification Deter Identity Theft Fraud?

Besides asking people to check on their privacy settings, social media sites should also try to use ID verification systems when it comes to profiles. There are companies that specialise in providing ID verification and background checks. If social media sites partner up with such organisations the majority, if not all, identity frauds that happen on social media can be stopped. The ID verification will ask the individual to prove their identity and hence most of the scammers will simply backoff realising they’ll be caught or will be unable to prove the identity they wish to take on.

How Does an Identity Verification Service Work?

Having mentioned that ID verifiers can deter a social media scam, let us see the process they follow and how it works. At the heart of the identity verification system is an advanced AI system that utilises the Internet, the user’s webcam or their smartphone camera if a webcam is unavailable. So in the case of social media sites, when a scammer sets up a profile, which includes  name, picture and other details matching an existing user, the ID verification system steps in. The user is asked to face the camera and then asked to share their ID focusing on the picture, name and DOB. The AI then matches all the details and checks for signs of tampering or forgery on the ID. The AI also checks the face of the person for excessive makeup, masks or other things that might be used to hide or distort identity. Yet it is smart enough to recognise glasses, facial hair, hair cuts, etc. Also, some of the better companies offer an additional layer of HI (human intelligence) to make sure that all AI verified information is correct. Live people verify the results of the AI to ensure there aren’t any false positives. The entire verification process takes less than a minute. Once the AI gives a thumbs’ up then the profile is allowed to go online. Such a system would prevent identity theft and fraud within the social media platform.

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Secure Travel Experience

Verify ID For a Secure Travel Experience

Since we are using the Internet for a great many things including shopping to online booking of flights and hotel rooms. The need for a system that would ensure that the people making the bookings are actually who they say they are is important.  The system should verify ID online. The following hypothetical situation that is based on an actual process that is carried out by TSA will elaborate our point.

Picture this: You plan on visiting your parents this Christmas and New Year’s. Since they live in another city you buy your ticket in advance. Buying the ticket in advance saves you money as the earlier you buy it  from the flight date the cheaper it is. When the time comes for your flight, you leave for the airport and there you reach the check-in counter and over there they just check your id and tag your baggage and let you enter the waiting lounge. When you look back some of the passengers’ ID’s, baggage and they themselves were being checked. You think to yourself that it must be your lucky day. You weren’t really sure if you would extend your leave so you didn’t buy a return ticket. When the time came for you to go back, you purchase a ticket online a couple of hour before the flight. When you reach the airport’s check-in counter. The staff ask for your ID, another person asks you to show your luggage and let them inspect it. They also give you a pat-down and ask you questions as to why you’re going and why you were here. After finally getting satisfactory answers from you they allow you to go to the waiting lounge. As you walk towards the lounge you look back and notice that a person just gave his ID got his bag tagged and was allowed to go, just like you did when you were coming to this city. You go and sit down and start wondering why this happened, the guy who was behind you asks if he can sit on the seat next to you. You allow him. Your curiosity gets the best of you and you ask him why they just let him go without any checking? Do they check randomly? He tells you that if you buy a ticket in advance they verify your id and do background checks beforehand so that they don’t have to do a check as they just did with you. You thank him for explaining the situation to you. You wonder why they don’t have access to a live verification system that would carry out a background check in real time.

Why Should we Verify ID in Remote Hotel Service?

Online credit card fraud prevention is needed in online booking. There is no way an online booking website can track a fraudulent transaction without a verification system. So if you are a hotel and are looking to facilitate its customers  with the ease of online purchasing and booking, then you need a more secure way to go about it. Frauds and identity thefts not only breach the security aspect of your business but also cause you a major loss in reputation. So if you’re offering a remote hotel service then you need to have some system that can make sure that the original owner is making the credit card transaction. This can easily be done with an online KYC (Know Your Customer) solution that can be integrated with your website to verify ID.

Verify ID to Avoid Chargebacks

Besides the remote hotel service, KYC solutions are essential for the travel industry in general.  Airline and transport services that allow for online booking are all susceptible to chargebacks due to the use of stolen credit cards. The chance of a friendly fraud is also a reality. In order to counter that, the KYC solution offers proof of purchase as well as identification of the individual.

How do solutions that verify ID work?

The best possible solution for the corporate and government sector is to make use of an e-KYC solution that can help them reduce security threats. This can be simply done by integrating the SaaS, within your business website or application. With the use of the system’s state-of-the-art business verification services, the risks involved can be decreased majorly. Running on an advanced AI system, it utilises the Internet, webcam or smartphone camera to carry out online real time process to verify ID. When a person is doing a booking, after he’s filled in the required information the AI takes over. The person is asked to face the camera while the AI checks for anything that would indicate that the person is altering or hiding his face. Such as heavy makeup, masks, or using a picture. The Ai is smart enough to take into account wearing of jewellery and glasses as well as changes in facial hair and hairstyles. Then the individual is asked to present their ID and to focus on the picture, Name, DOB, and number (if applicable). The AI then matches the picture with the person’s face and the data with the one provided by the person in the initial form. Once  everything is verified and turns out clear. The system proceeds with the booking. Incase of a false outcome the booking is stopped. The entire verification session is recorded and takes less than a minute. In general, not only will it save your valuable time but also help you get rid of carbon based storage, i.e. no manual or paper work. The chances of data loss will also be minimised.

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russia

Shufti Pro® Expands ID Checks Online to Russia and China

 

Shufti Pro® advances their technology to support these world giants for their e-KYC needs to satiate stipulation for digital ID verification services from the East.

BATH, United Kingdom – November 1, 2017 – Shufti Pro®, the emergent leader in the online identity and document authentication milieu announced earlier today that their business verification services will now be available in Russia and China.

The software as a service endeavours to perform online identity verification for online businesses, online merchants, financial institutions, etc. They have now decided to extend their service to those in Russia and China as well. Shufti Pro® is now able to verify the original passports and their holders’ identity in the two countries.

Shufti Pro® employs the use of artificial as well as human intelligence to verify the authenticity of the document as well as the identity of the owner. Their process is quick, accurate, efficient and happens in real-time. They strive to provide digital KYC verification solutions with the aim of making the global virtual marketplace a safe and secure place as a trading platform.

CEO, Shufti Pro® said:

“We are proud to announce our expansion to include Russia and China in the countries we support. Rest assured, our integration into their online businesses will result in increased fraud prevention through accurate and digital identity and passport verification services .”

Talks with the CTO of the corporation enlightened us about their plans to include Russian and Chinese languages in their system as well. “Language incorporation, in the future, will result in a greater number of government-issued documents to be verified, like ID cards, driving licenses, credit/debit cards, etc.”, informed the CTO, Shufti Pro®.

The company plans to keep working on their technology in order to engage the entire world and bring them on one platform where they can fight against frauds, money laundering, identity thefts, etc. Reflecting on their astonishing progress in the span of 12 months, it seems highly probable that their goal of being one of the best fraud protection services will be realised sooner rather than later.