In 2018, approximately $1 billion was illicitly laundered through various transaction types. That number very nearly tripled to $2.8 billion in 2019 of not-so-funny money run through cryptocurrencies and, increasingly, online businesses used with or without the owners’ knowledge as fronts for washing ill-gotten gains. This is estimated to cost $200 billion annually in the U.S. alone in an average year. What about an “anything but average” year?
When the world went off its axis in 2020 due to COVID-19 and the utter disruption of life as we knew it, cybercriminals rejoiced in that chaos. Resulting cybertheft outbreaks attending the pandemic have put anti-money laundering (AML) and Know Your Customer (KYC) firmly in the spotlight of financial institutions and merchants, as they are on the hook for security.
It’s a daunting problem, accelerated like so many things by the pandemic. According to the PYMNTS September-October 2020 AML/KYC Tracker done in collaboration with Trulioo, “The United Nations estimates that up to $2 trillion — or 5 percent of the global gross domestic product (GDP) — is laundered each year, with criminals leveraging tactics as basic as exchanging gift cards and as elaborate as setting up brick-and-mortar businesses through which they can funnel cash.”
Identity solutions remain the best line of defense against cyber fraudsters in a time of remote onboarding on a global scale. New and enhanced solutions are being deployed with greater urgency now as the scope of pandemic-era fraud and cybertheft begin to be felt across the financial world, from government disbursements to instant money apps.
Just the right amount of friction
Remote onboarding is the way of the things now, and it’s manageable when businesses are equipped with the right tools. It comes down to identity, and identity can be made secure.
“With the rise in digital payment usage also came more fraud and online crime. As a first step to safeguarding against bad actors, companies must ensure they’re paying close attention to the onboarding process,” Trulioo Chief Operating Officer Zac Cohen told PYMNTS. “By taking a holistic approach — using a variety of identity verification and authentication methods to deliver the right level of risk protection — businesses can prevent these bad actors from accessing their customers.”
PYMNTS’ September-October 2020 AML/KYC Tracker notes, “Consumers may find it frustrating to encounter difficulties in account opening, but they do recognize the need for ironclad security.”
The new Tracker cites a recent Trulioo study finding that 62 percent of consumers prefer onboarding experiences that rank security over velocity across all industries except gaming. Fully 73 percent of consumers reported having “become less tolerant of these deficiencies over the past few years,” the Tracker states. It’s a strong argument for the right kinds of friction.
Visibility, transparency and verifiable identity
Illustrating issues and answers around the remote onboarding conundrum, PYMNTS’ new AML/KYC Tracker converses with Amit Sagiv and Volodymyr Tsukur, co-heads of Wix Payments, the payments processing wing of web development firm Wix.
As the new Tracker observes, “Having a detailed and holistic view of customers’ typical transactions helps payments processors identify and flag unusual ones that could be the result of money laundering.” Wix’s Sagiv added, “We know what they’re about to sell, what products they added and removed; we know where they’re doing their marketing.”
In other words, “It’s a 360-degree overview from both the buyer perspective and the merchant perspective,” he said, “and with all the data points that we’re collecting, we could really pinpoint the [merchants] that should be expelled from the platform.”
Visibility, transparency and verifiable identity comingle into a defensive matrix that cyberthieves are finding it increasingly difficult to breach. And customers can sense it.
As Cohen told PYMNTS, “It is worth noting that customers expect safe, seamless and quick onboarding when they’re signing up for a new mobile app. However, achieving a balance can be tricky. If companies make onboarding too complicated, they’ll lose customers; on the other hand, if they don’t have the right due diligence in place, they risk falling victim to bad actors. This is why having technology partners that can provide real-time identity verification in a safe and trusted way is crucial in today’s digital environment.”