If you are involved in business operations, you know the key to success is keeping an eye on the numbers. But it’s not enough to be cash flow positive, the funds also need to be “clean”. That is, the funds have to be legitimate and accountable, up to the scrutiny of an audit.
In today’s dangerous and fast-moving world, dirty money is a recipe for major trouble. No business that wants to avoid hefty fines or a bad reputation can risk dealing with funds that are associated with fraud, terrorism or money laundering. A key preventive step is knowing your customers, which means having an effective system in place to verify the identity of your customers or clients.
Did you know that in the United States alone, identity theft affected 17.6 million people, which resulted in a financial loss of $15.4 billion?
As if those staggering stats were not enough for concern, we find ourselves rapidly entering a global marketplace where cross-border transactions are becoming the norm. This means that there is a dire need for ID verification. Specifically in the following industries:
How many times have you walked into one of your bank's branches and been asked to provide ID? It’s not the end of the word, but it is a minor inconvenience to avoid any instances of identity theft or fraud.
Another reason that your bank is asking for ID, even if you just need change for a $20 bill, because it is the law. In the United States, the Patriot Act requires banks to verify the identification of customers to prevent money laundering. These names are also compared to names on federal lists containing known terrorists.
In Canada, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has a mandate that is similar to the United States.
In the not-distant-future, however, banks will start using biometrics to validate an individual’s identity. In fact, Royal Bank has been testing out the new technologies of iris scanning, face recognition, speech recognition and fingerprint Combining various technologies, along with validated identity data, provides a multi-layer approach that promises to be highly secure and efficient.
"They're inherently wired and regulated to protect the customer with things like 'know-your-client and anti-money laundering rules,'” Bianca Lopes, director of strategy at BioConnect, told the Huffington Post. This means that you can expect to see the financial services industry quickly adapt the use of biometrics.
With millions of transactions occurring online each, cyber criminals have been altering and optimizing payment services for their own personal gain, such as money laundering and fraud. For example, nefarious individuals use online games to move money between multiple accounts or even use mobile chat apps launder a large amount of money into smaller amounts.
Besides laundering money, fraudulent activities occur daily. These can include;
- Phishing where emails or websites that pretend to be legitimate in order to obtain bank or credit card information and even login credentials.
- Identity theft can occur online or offline, but happens when someone pretends to be you after stealing private information like your bank account number.
- Hackers can also steal your credit card number through scams involving fees or wire transfers.
- Criminals also create fake online businesses that appear to be legit, but are only in the business of obtaining your personal information.
- There are even some criminals who commit invoice fraud, like sending duplicate invoices.
As with financial services, ID verification could prevent any of the above from happening. You can help protect your customers and your bottom line by ensuring any transactions are by the actual person listed on the purchase.
But, how can you do that electronically?
A major step is to use an is an online electronic identity verification (eIDV) platform that complies with cross-border Anti-Money Laundering (AML) and Know Your Customer (KYC) rules and can be used internationally by payments, e-commerce, financial services providers, insurance, gaming and remittance clients.
Financial services and payments aren’t the only industries that are dealing with anti-money laundering (AML) and anti-terrorism financing (ATF) concerns. The real estate industry also needs to comply with these regulations. The reason? Criminals can create shell companies to launder money.
Since 2004, for example, it was found that “£180 million of UK property had been brought under criminal investigation as the suspected proceeds of corruption.” To combat this “crisis,” the UK pushed for full-disclosure of offshore ownership.
In the U.S. and Canada FinCEN and FINTRAC have stepped in to prevent any suspicious activities involving real estate. FINTRAC even went as far to say that “the purchase of Canadian real estate assets with offshore money and/or by offshore persons was noted as a significant risk factor.”
Realtors are now expected to verify the identification of buyers.
Believe it or not, identity theft now includes medical identity theft. This is where personal information, such as a Social Security number, and medical information is stolen in order for criminals to receive treatment for free, illegally under another persons' name or even to secure addictive drugs. If you become a victim of medical identity theft, you could lose your coverage, tarnish your credit, face legal troubles, or pay higher insurance premiums.
Hospitals and healthcare providers can use software that notifies them of duplicate records and begin using biometrics to verify the identification of patients.
Your ID can also be stolen while traveling. While taking basic preventive measures, such as protecting your documents, using secure networks, only withdrawing money from ATMs, and changing your passwords and PINs, there will be a push for a standard government policy that will use digital identification to make it easier to verify an individual's identification no matter where they are in the world.
Finally, online marketplaces like eCommerce are also prone to instances of fraud. For example, cybercriminals can use a tactic like pagejacking where traffic from an eCommerce site is redirected to another site that contains malicious material or create a fake merchant account in order to steal personal information.
Even the emerging market of P2P lending is becoming vulnerable to scam. Earlier this year we learned about a $7.6 billion Ponzi scheme involving China’s largest P2P lender Ezubao.
Online marketplaces, such as eCommerce sites and p2p lenders, should start using identification verification to prevent these cases of fraud.
Solutions like Trulioo’s Global Gateway are able to mitigate risks by helping to detect fraud, while complying with regional Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations at the same time.