RegTech The Case for Financial Inclusion

RegTech: The Case for Financial Inclusion

The FinTech industry has grown tremendously in recent years, introducing both scale and efficiency in new banking technologies. According to Statista, at an annual growth rate of 18%, the global transaction value in FinTech is expected to grow to $8 trillion by 2022. But according to research by Thomson Reuters, the financial industry spends at least a day, weekly, to track regulatory shifts which can be increasingly time-consuming and costly. So as the fintech and compliance costs continue to grow, RegTech seems to be getting global attention from the financial sector, as well. 

Traditional financial service providers (banks, insurance, transactions, and payment services, mobile wallet payments) have no option but to catch up with changing tides, in order to survive the technology revolution. From cutting costs to providing seamless transaction experiences, FinTech and RegTech both have changed the way individuals and businesses manage money. 

The world has witnessed more transparency in banking, and, financial transactions are thriving with the use of disruptive technologies such as AI, machine learning, and blockchain. Fueled by the advent of the internet, FinTech has now grown to taller heights with mobile payments and online banking. 

Reaching the Unbanked

One of the marked success of this digital wave is how it has led to increased access for previously unbanked populations, largely due to mass outreach of mobiles and the internet. Now, mobile phones are making it possible for more and more people to enter the global financial system, albeit with limited access to services such as mobile payments and transfers. 

The mobile money market is witnessing a revolutionary transformation fueled largely by:

  1. Growing focus on customer experience
  2. Diversified financial services structure
  3. Evolving regulatory landscape
  4. Expanding mobile money services

Mobile money accounts, as well as text and app-based financial accounts, are providing financial coverage to growing global populations. A small but rising percentage is also taking advantage of smartphone technology around the world. However, this is subject to the availability of adequate underlying infrastructure such as power supply. The challenge is greater in developing countries where only 40% of adults have access to both the internet and mobile phones, as opposed to 82% in high-income economies. 

Online Security and meeting global compliance is still a topmost priority for customers and businesses alike. For this reason, digital banks are also focusing on RegTech in banking solutions for building long-term trust in the market.

How RegTech and FinTech are related

A large customer base is currently left unserved in the financial services industry due to a lack of the right infrastructure. As the FinTech revolution continues to benefit the economy and break into new markets, it promises to close gaps in financial inclusion. However, this comes with high risks of exploitation that need to be managed. 

Currently, 1.7 billion people in the world are unbanked, down from 2 billion in 2014. This is one of the most challenging pain points for financial service providers. FinTech is changing this, and RegTech can accelerate the process.

 

How RegTech is Relevant to FinTech

 

RegTech startups are experiencing growth and investment at almost the same rate as the FinTech industry. Firms are realising the need to capitalize on compliance efficiency and use it for a competitive edge in the industry. There is great potential for powering the future of financial regulation by integrating technologies into supervisory systems used by banks.

RegTech has major implications for financial institutions in the form of reduced regulatory costs and improved operational efficiency. With far-reaching benefits for the economy, RegTech in banking is also aspiring to drive growth and profitability by better regulatory reporting and risk management, as well as transaction monitoring. 

This is especially relevant for emerging markets, where a notable percentage of the population can experience compounded benefits from access to services like micro-credit and remittances. The effective use of RegTech in banking strikes a balance between access to credit and credit security. 

With machine learning, artificial intelligence, and e-KYC (Know-Your-Customer) verification methods, the gains are far-reaching. Fraud mitigation and reduced compliance costs make it possible for FinTech to include more financially excluded population segments. Automated KYC processes through RegTech ensure that foolproof methods for legal use of financial services can be made effective. Using API code, RegTech can also simplify complex regulations that optimise compliance costs of time and labor. 

Both financial institutions and regulatory authorities see added value in the adoption of RegTech for better compliance and service delivery. APIs for data collection and reporting have also shown a marked improvement in customer engagement, as well as compliance. 

RegTech solutions and AML compliance

RegTech solutions are increasingly used by financial institutions to comply with the regulation of anti-money laundering and the evolution of other financial crimes. There is no denying the fact that eliminating the crimes of money laundering has been one of the biggest challenges for financial institutions over the years when new and improved methods of money laundering are on the rise. But regulatory technology (regtech) is helping financial institutions to eliminate financial crimes through regular AML checks, set into motion by regulatory authorities. 

Regtech solutions for AML compliance offer a cost-saving solution to the financial sector for real-time identity verification, crime monitoring, and reporting. It not only improves the efficiency of the entire system but also reduces operational costs altogether. 

With the use of intelligent technologies, RegTech in banking is a frictionless solution that can reduce time by easily screening people against vast databases. The regulatory landscape is subjected to regular change, this evolution of regulatory trends affect the business operations directly. That’s why RegTech solutions and AML compliance is the need of the hour. 

Service offerings by RegTech

Driven largely by business demand and technology innovation, there are five main service offerings by RegTech :

  1. Regulatory reporting
  2. Risk management
  3. Identity management and control
  4. Compliance
  5. Transaction monitoring

Challenges in Financial Service Delivery 

As financial services become more digitized and pervasive, regulatory systems need to adopt more forward-thinking ways of digital transformation. 

The foremost challenge in providing digital financial services to previously unserved populations is risk management. In most cases, financial authorities are still learning their way into the digital revolution. If vast amounts of data are collected without apt use of APIs, serious data security concerns could arise. This could undermine the regtech revolution and make the onboarding process more complex for new entrants.  

Supporting infrastructure in the form of digital databases is also absent in most cases. While there is a steep demand for mobile money accounts, some key services such as government payments (pensions, wages, social benefits) are still paid in cash. This reinforces financial exclusion for large segments of the population who could otherwise benefit from services such as mobile payments. 

Additionally, stringent identity verification requirements, such as those in KYC, get in the way of digital relevancy. National identity document verifications are sometimes not enough to ensure that people from remote areas can open an account and other local documents are required for account opening. This opens up a range of opportunities for the RegTech industry to influence financial service delivery, and in turn financial inclusion. 

RegTech Solutions: Closing Delivery Gaps

Across the globe, traditional financial systems are increasingly embracing technological advancements and committing to streamlining regulatory networks. Regulatory sandboxes and ‘reg labs’ are now being facilitated for innovation, to cater largely to the spike in RegTech solutions and AML compliance in both developed and developing countries. 

Sandboxes are controlled spaces for tech firms to test out new technologies under the regulator’s supervision. In addition to offering room for innovation, RegTech sandboxes can also be used as effective feedback and communication channels between FinTechs, regulators, and RegTech solution providers. For financial inclusion, this means balancing innovation and risk to reach underserved customers. 

Improving access to mobile money markets also depends a great deal on the efficient implementation of KYC regulations. In areas where access to financial services is a challenge, fulfilling tedious document verification requirements can be a cumbersome task. This stands in the way of scaling mobile money networks, hence hurting financial inclusion. 

This is where RegTech plays a central role. By simplifying customer onboarding processes, through efficient use of AI and HI, the mobile money industry can get a real push. The use of innovative e-KYC technologies such as biometric authentication and digital ID systems can make the process more efficient. 

With tangible results in the form of financial stability and customer engagement, investment in better regulation technology is being recognised as key to an efficient financial system. A sound regulatory environment, with regtech applications that support risk management, will ensure that economies reap maximum value from the FinTech revolution.

Visa Mastercard Face FTC Inquiry Over Debit Card Transactions

Visa, Mastercard Face FTC Inquiry Over Debit Card Transactions

Visa Inc. and Mastercard Inc. are once again facing inquiries by the Federal Trade Commission over policies that prevent merchants from routing debit card transactions over substitute networks. 

As part of a preliminary inquiry, the FTC has been reaching out to large merchants and their trade groups over this issue. The issue at hand is whether Visa, Mastercard, and other large debit card issuers are restricting retailers from routing some mobile payments and tap-to-pay transactions over alternate networks like Pulse, NYCE and Star. 

A spokesman for Mastercard, Seth Eisen, said that the organization will cooperate with FTC’s request. On the other hand, representatives for Visa and FTC declined to comment. 

FTC investigators are focusing on transactions made with mobile wallets as those can automatically route to the global application identifiers which employ the networks of Visa and Mastercard. Another aspect of the investigation is to make sure that the country’s largest debit card issuers are restricting transactions that don’t demand a personal identification number from being directed over other networks. 

The FTC has also investigated issues with debit routing in the past. In 2016, Visa modified its rules after an FTC inquiry, explaining that the retailers would not be required to demand the cardholders to choose a network for their transactions. 

 

Data breaches

Data Breaches – Types, Sources, and Preventive Measures

A large number of well-renowned companies are under the threat of high-scale data breaches. After one data breach, it does not mean that the same company could not again be exposed to a data breach. Exceptions are there if that company successfully take in place stringent actions after tackling the vulnerabilities exploited before. An example of frequent data breaches is Yahoo data breach. Statistics show that in August 2016, Yahoo hack was uncovered that took place in 2014. It affected user accounts of around 500 million people. The same company faced another hack in December 2016 due to which 1 billion accounts were affected. In October 2017, this report was updated, stating a total of 3 billion affected users and is considered biggest data breach in history.

With the advent of digital file transfers and reliance on digital communication means by multiple industries, data breaches are residing fairly at a high rate. In the U.S, in 2015 data breaches increased to 781 million which were 157 million ten years back i.e. in 2005. In the same time period, compromised user records increased from 67 million to about 169 million. An aforementioned data breach of Yahoo was absolutely contributing to these exposed records. The company advised its users to immediately change passwords and guarantees its users that it will take stringent measures to eliminate the risks of further attacks.

There is a lose-lose situation when a data breach occurs. It is not only the customers whose information is compromised, not just the deceived organization which is dealing with the recovery of hijacked information, meeting legal compliance needs and doing the aftermath of reputational damage. This breach cycle has to break. Otherwise, the lose-lose situation will never end. 

What Data is Breached?

Personal, as well as a sensitive chunk of information, is breached. The information which online platforms ask to recognize some identity is compromised. This data includes first and last name, email address, residential address, contact number, username, passwords and some encryption keys that are a secret between user and organization for identification purposes. This information is called personally Identifiable Information (PII). 

This hijacked information is sold to third parties and are also weaponized by cybercriminals who use this information to conduct a large number of fraudulent activities. Credit card information is stolen through which fraudsters perform transactions, account takeover frauds are done, real identities are used in several other cybercrimes. Identities of children and adults are used to perform money laundering and terrorist financing. The reason is that these names have not been previously used or involved in any criminal activity before.

Emerging Forms of Data Breaches 

The dark web and emerging data breaches are threatening industries. Phishing attacks and account takeover frauds are looming online websites. E-commerce businesses, online gaming, charity, banking websites, etc. are highly prone to cyberattacks because of the assets it deals with. Any loophole in the system can cost businesses with heavy monetary and reputational loss. Online websites need to ensure that they authenticate each onboarding entity thoroughly against a bunch of checks that are enough to filter out bad actors from honest ones. Along with this, existing users should continuously be verified to make sure that identity is not switched with any fraudulent entity. 

Identity Theft

 

It is one of the most common data breaches. Identity theft was estimated to be accounted for about 50% of data breaches globally in 2015. It included about 40% of compromised records in the same year. Due to identity theft, a large number of financial institutions are affected. These sectors hold highly sensitive information in which financial information is common. This information if gets compromised results in huge damage for both the victim and the organization. Among this, the second most common type is the financial data breach. The financial sector lost 120 million identities in 2015. Cybercrimes are high in these sectors due to the attracting opportunities that fraudsters look for. The annual loss is an average of $13.5 million, which is highest as compared to other industries.

Phishing Attacks

The emergence of social engineering is giving rise to multiple other frauds. Among which, email phishing attacks and website phishing attacks are common. End-users are targeted with email phishing attacks. A phishing email from a renowned brand is sent to the legitimate customers which ask users to enter their credentials and credit card information. This email is from a fraudster who is trying to hack the account of end-users. This could be done by clicking the malicious link which redirects the user to a website that seems real but is just a clone of that website. Right after suer enter credentials, the account is hacked through that phishing attacks. 

Last year, most of the phishing attacks targeted e-commerce businesses, financial systems, and payment websites. Hackers are all active to exploit weaknesses in the system thorugh innovative tricks. On the same side, online businesses should take in place technological solutions to acter to these tricks.  

Credentials Stuffing

Credential stuffing is more or less similar to account takeover fraud. It is a cyberattack in which username and password related information are compromised and that account is hijacked. Fraudster gets unauthorized access to the account by stuffing combinations of username and passwords through automated requests for login. This stuffing is done by automated bots who fit in every possible combination to hack the account and use it for malevolent purposes. Research shows that stuffing attacks are 8% successful while attempting to account for takeover.

Overcoming Data Breaches with Biometric Authentication

Understanding the nature of data breaches, now there is a need for taking into account measures that mitigate future damage. Considering the common methods of user authentication i.e. 2-factor SMS based authentication ensures security when a user tries to access the account from different devices or locations. But unfortunately, this method of user verification is not most adopted. Only 10% of Gmail users use two-step verification. 

Well, that was one choice, data breaches take place as a result of unauthorized data access. Therefore, this should be catered with the immediate security layer that ensures an authentic user is trying to access the data/account, edit it or delete it. 

Biometric authentication is another option. For identity proofing and online user verification, a prompt, efficient and robust method is to verify the end-user based on biometrics. This could be through fingerprint scanning, iris/retina scanning or face verification.

Face Verification: Through unique facial features, an end-user can be verified. Every time a user gives an access request to the backend system, it will ask to verify the face biometrics. If the traits match, the user will be authenticated and get access to the account. Face verification uses Artificial Intelligence and Machine learning technology to map the facial features and decide in real-time whether the characteristics match the real user or not. 

Yes, fraudsters use tricks to fool the system, but facial recognition systems are strong enough to cater to those. The tricks of the printed image, or already taken selfie are used, which are tackled through liveness detection. Liveness detection ensures that the user is physically present at the time of verification. This can be done by recognizing the blinking of an eye, minor facial movements, 3D depth perception, etc. It ensures that the end-user is not fooling the system in any way. 

Biometric authentication is the primary step to cut the roots of growing data breaches. All possible cyberattacks are the result of unauthorized access which compromises user data and costs the businesses way more than the technical solution installment. Also, the regulatory authorities are set up to evaluate industries that are prone to data breaches and whether or not they take in place security measures to deter the risks. Identity verification through biometrics contributes to combat the risks of cyberattacks and hefty compliance fines.

FAT Plenary Outcomes min

Common Online Scams You Need to Know About

The explosion of the internet and the world moving towards the fourth industrial revolution have exposed the majority of the businesses and individuals. The user experience and ease of access to everything are driving the major proportion of humans towards the adoption of digital operations. This has created another opportunity for the scammers and fraudsters to look out for some extra cash.

With the increased presence of individuals on online shopping platforms and social media, the swindlers are always looking for a chance to fleece you by any means. With advanced technology and social engineering tactics, the fraudsters have become quite sophisticated. Due to this, most of the scams even seem real and not fake.

Here are some common types of scams that people fall victim to.

Smishing (SMS Phishing)

Smishing, also known as an SMS-phishing attack is becoming common due to the smartphone revolution. In this type of fraud, people often receive a text message from “Bank” or “Card issuer” saying there is some problem with the account or someone tried to access their account and they immediately need to contact with their account information. Even some messages say that you have won a lottery or a gift card from let’s say, Wallmart, and you are required to prove your identity through a call or whatever the message says to avail.
Such messages seem like a real warning from the company, but actually sender is some fraudster hoping to receive the account information from the victim. The same is the case with bogus gift cards. In order to avail that offer, the scammers ask victims to pay the shipping fee or and pay a security fee. Biting into such messages, you will have to surrender your card details to the black hat marketers and scammers leading to credit card verification and CNP frauds.

The Dating Scams

With the expanding trend of online dating sites, cybercriminals are availing this opportunity to scam people in a romance scam and gain financial benefits. Such scams are not limited to defrauding people, in fact, there have been multiple cases where the scammers are professional cybercriminals and use victims as money mules and drug mules without their knowledge.

For instance, in 2016 one such incident was reported in which Edwena Doore fell victim to Kenneth Bruce, whom she met online, and landed in jail for five months for unknowingly laundering $700,000. In addition to this amount, she also lost her own money during her relationship with the offender. As per report, she was warned by the police to stay away from Bruce and she did for the time being and then again contacted him few months later.

In these scams, the scammers and imposters lookout for the real-people and after gaining their trust they start their activities by demanding money. These scammers know really well how to play the emotional card and trick the victims that they are ready to do anything as per the scammers. 

The Hitman Scam 

The hitman Scam is a type of scam in which the victims receive an email from scammers saying that they are hired to kill them and if they want to live then they must transfer money to their account. Though it seems very ridiculous why would someone fell victim to such a message? But the truth is people don’t take life threat easy and that’s what the scammers take advantage of.

To make the threat look more real, the scammers add some information about the person in the message so that the person receiving it would feel under threat. This information is something that people already share on their social media accounts. Due to an active presence on the internet, accessing someone’s information is not difficult anymore. Using this information the fraudsters target people and are successful in stealing money from them

BEC frauds

Business Email Compromise (BEC) frauds are a very common type of frauds, especially in the corporate sectors. To target the entity, the criminals and fraudsters have to do a lot of research. What they do is they present themselves as the representative of some company and send an email or make a call to the victims demanding urgent funds transfer or any other financial incentives.

People easily fell for this scam because firstly the email is from an official account and secondly it is full-fledged planned fraud involving detailed information about the target. Moreover, this scam is executed in a very friendly way. Either the scammers manipulate the targets with their sugar-coated chats or they show the urgency to fulfill their request of funds transfer. 

Free Trial Offer Scam

One of the most common scams is the Free-trial scams which fascinate the users a lot. Finding free trial on the internet that just requires the users to pay shipping and handling fees. Such products and services and really attract the customers and they often register for a free trial. But this is not about it only.

On the backend, there is a lot more. The behavior of a user of clicking “I agree” without reading the whole terms and conditions gives it away to the fraudsters to add the clauses as per their advantage. When you sign up for a free trial, you unknowingly get yourself in trouble with a monthly subscription which is automatically deducted every month from your account.

The World of Charity

The scammers are proactively taking advantage of people’s sympathy and kindness by pretending to be a charity organization. Playing with people’s emotions has never been easy like it is now. By creating fake identities on the internet, the scammers are continuously tricking people into transferring the funds for the orphans and people in need. Many people fall for this scam and end up losing their money to the fraudsters. 

What should you do?

These digital scams and frauds are very common and can target any individual with an online presence. People aren’t the only ones getting affected by these frauds, but businesses are equally on the target list of cybercriminals. Most of such online scams rely on the users to take action. In order to avoid and prevent such scams, the people and businesses need to be educated first about the ways the scammer carry out their activities – i.e. social engineering tactics.

Another way is before taking any action, you must verify the identity of the resource. Especially the businesses must follow proper identity verification services to combat BEC frauds.

Digital Document Verification Giving Wing to Recruitment Sites

Digital Document Verification Giving Wing to Recruitment Sites

Document Verification: In an industry that’s all about people, it’s critical that you know that a candidate is who they say they are. Most recruitment business will have a process in place for making identity checks, but a manual process is time-consuming and inconsistent.

Job seeking is an uphill task, recruitment sites are on a mission to reshape the employment market by connecting local companies with local job seekers in an instant with their smartphone. User identification is one of the major requirements for such an employment platform in order to fend off scammers and fraudsters. Carrying out a robust and seamless due diligence process to register authentic users is imperative for such business. 

Following are the reasons why an ID scanning system should be used by recruitment business to gain benefits:

Be Confident in Audit

With electronic identity verification in place that stores copies of the identity document checks, date and time-stamped with a record of who made the check, making the agency always prepared for an audit – be that from an external company, a client or even immigration enforcement. So it makes the agency prepared beforehand saving a lot of time and effort.

Deter Fraud

Almost every business online is a center of attraction for cybercriminals. These criminals are paving ways for frauds like identity theft and other digital scams. Verifying documents online of job seekers not only decreases the frauds but also helps in combating them. When a job seeker uploads his document, at that very moment, documents are verified and only authentic document are kept for further sending to different organizations rest are discarded. Candidates may present fake or forged documents just to get hired. These may include, the depiction of fake certifications, when in reality, they may not even be half as qualified. To fight back these issues, digital identity verification becomes plays a vital role, so the identity and the documents presented by the candidates may be verified using these authentic digital techniques. 

Increased Security

It is more important than ever to verify the documents of job seekers due to an increased risk of terrorist funding. Identity solutions are essential to instantly verify the document of visitors in real-time and easily, making both job seekers and companies providing the job feel safer. 

Better Relationship

         Online document verification eliminates the annoying pile of paperwork making the business one step ahead and more customer-friendly. Job seekers will appreciate your attention to safeguarding their identity, building rapport, and brand loyalty.

Ensure Greater Accuracy

  Flaws and errors are always expected while taking user information manually. At times customer mistypes information. Handwritten can even be difficult to read leading to data entry errors. Online document verification eliminates all these possibilities and streamlines the process as according to that provided information online job providing platform haunts the best possible jobs for you matching your skills.

Time-Saving

In any business, deadlines are tight and meeting margins matters a lot. So any possible way that saves time is very important. Manual document checking is laborious and slow, it requires a member of staff to carefully checking all documents. But online document verification system will be able to process the documents in no time. It also removes the need to photocopy files for future audits. It saves time that you could be spending doing something else of value to your business.

Introduce Consistency

A manual work check will only be as good as a person making it. The human element can lead to an inconsistent decision or even unconscious bias towards certain candidates. In real it is always very difficult to train all the staff to document experts and to keep up to date with the ever-changing document catalog during identity checks. With an online ID verification system, you need to train your staff for all this. 

Protection Of Business

Placing a candidate who is using illegal documents and who is found to have no right to work could have serious damage to the brand and reputation as well as the risk of being fined.

Stand Strong in Competitive World

If the agency publicizes their use of electronic verification systems to help with ID scans, that gives client confidence and peace of mind that all the candidates have been verified consistently and are who they say they are. Many of customers widely communicate their use of ID verification technology, both to highlight the technology as a competitive strength against other agencies and also to deter anyone who may consider applying for roles using fraudulent documentation.

Ensuring Right Jobs For Right Candidate

ID verification, in this case, provides a filter. The real applicants having authenticated documents can be provided with the platforms to link with good companies to get recruited at. This on one hand filtrates the documents while on the other hand increases the rating of the recruitment site as it will be dealing with only real ones and not the scammers.

   As recruitment sites use the most advanced and transformative technological systems, it can quickly morph the world of work into a digitally designated algorithm that matches employees with multiple job seekers across numerous job sectors. Simply, this indicates that in a matter of seconds, such sites can match specific workers. Verily reliable document proofing is of great help in this regard.

document verification fraudulent

Document Verification Services for a Secure Freelance Platform

Picture this you have recently started a freelance website you have marketed it properly and followed through on all steps to make it popular. It’s going good, you have a decent number of people posting projects and a decent number of freelancers who are able to complete them. You really haven’t had any problems, you are the middle man and you just take a small commission from both the project owner and the freelancer. The entire system is automated so you really don’t have to do a lot. Then something like this happens — you see a chargeback and its for quite an amount. You search out what the issue is and find that a freelancer has not completed his task and has also taken some amount in advance. You try contacting the freelancer to get an update but the number is turned off and you haven’t received responses to your email. You take it as a one off and refund the project owner and don’t really take any action except for disabling the freelancers account. Guess what a few weeks later you get multiple chargebacks, all for the reason that the work had not been completed. All of the freelancers had taken an amount in advance. You are worried now, the previous project owner who requested the chargeback was quite angry and did not post any other projects. You also tried contacting the freelancers but as before there was no response. Your website is getting a bad repute online and the number of tasks being posted has declined. You think about stopping the advance payment option, but argue the fact that good resources as well as certain tasks require some amount in advance and plus you made your entire marketing campaign around this. You frantically search the web for a solution, you come across an article called “ Document Verification for a Secure Freelance Platform” You start reading it and as you go through it you realise what’s been happening with your website is freelance fraud. With tears of joy in your eyes you know your prayer’s have been answered and you say to yourself “I have found the solution to my problems…“

Deterring Freelance Fraud with Document Verification

Although the above paragraph is about a hypothetical situation but still the threat is very much real, it is something that can and has happened in one form or another. So the question arises how can one prevent such a fraud from ever occurring? To answer that we need to see what was the cause for the freelance fraud in the first place. In the hypothetical case above the freelancer site probably had a registration process that a freelancer was required to fill out plus they have to make a profile detailing their expertise. That is pretty standard but there is no way to verify that the person claiming to be that freelancer is actually them, no document verification to ensure their credentials are true and real. Given that in this platform the freelancer was allowed to take something in advance it set the stage for someone to exploit this feature. The person or people involved in this fraud probably created false identities knowing that there is no check and uploaded impressive credentials and mentioned great skills. The idea itself was great and would likely attract the best of the best to apply as freelancers. This in turn would attract people or organisations who wish to get their tasks done by highly-skilled workers. The only drawback was, it was not thought through properly and did not have a deterrent to avoid this kind of fraud. The deterrent in this case could have been a 3rd-party digital KYC or an identity verification service — something that could verify the credentials and documents to prove that the freelancer is truly who they say they are.  Later in the article we’ll look at a solution and the features such a solution have.

Freelance Scam – Another Situation

Before we go on and discuss the solution to this problem it would be good to mention the same could also work to prevent another type of Freelance Scam. This would be the opposite of what happened in the hypothetical situation above, it could be quite possible that the platform itself that is providing the freelance service turns out to be a scam. This would not only affect the freelancer but also the company or individual providing the projects. Supposing that the freelance service offers an escrow meaning they keep the money until the task is completed. What if they in the end after getting all the money do a disappearing act similar to the one’s that ICOs are pulling off? What would be something that would prove that they are the real deal and not some scam? The answer is that they probably would have invested in some third party service that ensures they are compliant with KYC rules and regulations and that they are serious about who’s joining up with them. In an absence of sound Document Verification mechanism; your platform is always at risk.

So is Document Verification by a Third-Party the Answer?

The answer is a big YES, the fact that nothing adds credibility to one business or in this case freelance platform is the investment they put in to it; it shows the company is against freelance scams. Not only that but since everyone who is on boarding as a freelancer is verified through their documents. The documents are sent over to the third-party verifier and checked for signs of tampering and forgery. Their pictures are matched with those on their ID cards and checked for irregularities. The great part is that verifications can be done live using a webcam or by submission documents. The whole process takes less than a minute. So they know if they try to pull a fast one they can be highlighted and criminally prosecuted as well.  This is one of the most effective deterrents of freelance fraud.

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