Digital technology is flipping the world of identity upside down. That’s why governments and organizations around the world are setting goals and establishing frameworks for rolling out comprehensive digital identity systems. Some have a long way to go, some are closing in and a few others are basically there. Fortunately, the digital identity ecosystem offers new solutions to help meet their needs. The bottom line is this: the future of identity is digital. So which countries and organizations are leading the charge? And what are the implications for the rest of the world? The prospects are both transformative and inspiring. Digital Global Snapshot Countries around the world, as well as businesses and other large organizations with digital identification requirements, are looking to execute and deliver on digital ID plans. One of the most far-reaching examples began in 2014. That’s when member countries of the European Union set out digital ID regulations in the Electronic Identification, Authentication and Trust Services (eIDAS), building a framework for a unified digital ID system across the EU. Within the EU itself, Estonia has emerged as a leader in the digital identity space. Every Estonian has a state-issued digital identity, allowing citizens to easily authenticate themselves for online services without paper documentation or a physical interaction. And just recently, the Australian government launched a new framework for digital identification that will have sweeping implications across the country. Adapting and streamlining the way digital engagements are handled, this framework could be a digital beacon for the rest of the world. The Plan Down Under The Australian government set about their framework to inform and guide a new national system of digital identity. Lead by the aptly named Digital Transformation Agency, the framework has been designed to address the needs of an increasingly digital society with usability, accessibility, security, privacy, fraud prevention and risk management at its core. Generally, the goal is to lay out a roadmap for a digital identity system for all Australians, recognizing the needs and concerns of the digital age. It also aims to set standards for any organization requiring digital identification to access online information or services. To ensure a robust and secure path forward, the Trusted Digital Identity Framework (TDIF) was created in consultation with the financial sector, digital identity experts, privacy advocates and the public. Simplifying Digital ID Currently, the Australian system for accessing online government services is not particularly efficient. Citizens require multiple accounts, logins and passwords and that can readily complicate and confuse matters. The system proposed in the new framework aims to streamline and simplify things with efficiency and greater public service as the obvious benefits. Essentially, a user should only have to prove their identity online one time, with that digital ID granting access to multiple services across any part of the government. The Australian government is aware of some of the other challenges faced by its citizens when it comes to engaging with the government in a digital way. The framework is looking to address a few of those issues. First off, the framework explores ways to remove the barriers for people lacking proper documentation, particularly for those needing to create an online or digital identity. Not everyone has a digital presence and that will need to be addressed. Likewise, corporate and business entities also have relationships and engagements with the government. The framework is offering ideas and solutions to simplify dealings between businesses and government. While Australia has been moving toward this kind of system for some time, this is a significant step in an ongoing process that will no doubt transform the way Australians engage with their government online. In 2013, the government set up the Financial System Inquiry to examine the needs of Australians and the national economy. Their recommendations one year later included a more streamlined, effective and user-friendly system for digital identity. This framework is the next evolution of that process. Others will be watching in earnest how the Australians execute and deliver on their plan. Digital ID Implications Of course, like anything relatively new to the world, the digital space raises serious concerns for some especially the security and integrity of personal and private data. That’s why these identity frameworks are being fleshed out to ensure those concerns are integral to the systems, with a high priority and emphasis placed on safety and security. But there are enormous benefits. In developing countries, for example, a system backed by digital ID technology could be a game changer – and a lifesaver. Traditional paper systems have left a lot of gaps and countless people have gone unregistered or undocumented. Lacking a birth certificate, a passport or other official physical identity documentation also leads to a lack of essential services, ranging from healthcare to financial services. Those problems can even extend into the profound such as denying access to justice or affecting one’s ability to exercise voting rights. These have enormous implications for societies, individuals and families, with children being especially vulnerable. While nations and international bodies look for ways to improve and digitize identification systems, there are also important business aspects. From account creation to authorized payments, digital identification helps to fight fraud and other criminal activities. It can also help companies with their compliance measures, especially KYC and AML – speeding up the process and removing some of the burdens and barriers. Together with your electronic identity verification solution, these new systems of digital ID open up new markets around the world, with greater trust and fewer risks during the verification process. As more and more people and businesses transact online – with the expectation for a ubiquitous and real-time experience – frameworks and systems like those in Australia, the EU and Estonia present new opportunities for companies to provide better services to their customers. International trade is huge; in 2016, world merchandise exports were valued at US$ 15.46 trillion and the growth rate is projected over two percent annually. Unfortunately, this also creates an environment that’s rife for abuse – trade-based money laundering (TBML) accounts for hundreds of billions of dollars of illegal money flows annually. With sums of that magnitude, it’s no surprise that TBML is highly sophisticated. And, as it hides its activities amongst massive volumes of legitimate trade, it’s difficult to uncover. Techniques such as under- or over-invoicing, falsifying documents, and misrepresenting financial transactions, are difficult to trace as they can involve multiple parties, jurisdictions and transactions. Additionally, true value is often difficult to set accurately. Is someone overpaying on purpose to hide illicit funds or is that what they think its worth? Consider artwork; as art is so subjective, how could authorities prove that the price paid was to hide funds, if everyone involved is in on the scam? Only 35 out of 220 jurisdictions have Anti-Money Laundering (AML) rules that specifically deal with art or antiquities. Of course, there are many other avenues for TBML. What is the proper price for a dress; $30? $300? $3000? Compliance officers assigned the role of uncovering TBML face a distinct lack of information for specifics that can help determine accurate pricing. Even if more information about the quality of the product is available, it’s difficult for compliance officers to be experts in the pricing vagrancies of multiple industries. Complicating the matter is the lack of shipping, import/export, and customs information that would help compliance teams assess the risk of a transaction. They are not privy to the same information that Customs and Border Protection (CBP) has. Due to privacy and confidentiality considerations, some jurisdictions don’t allow sharing information across borders — even within the same institution. In addition, 80 percent of trade activity is so-called open account trade, which is not documentary-based, thus offering no banking documentation to help make determinations. As in other areas of compliance, there’s trade-offs between allowing the free flow of commerce with ensuring that steps to effectively counter TBML are taken. After all, no one wants to unnecessarily burden legitimate trade but we can’t accept unfettered TBML. What’s a compliance officer to do? Know Your Customer While the tactics needed to properly vet against TBML require more extensive analysis, fortunately the overall strategy is well-known – or more precisely Know Your Business (KYB), as we are talking about business entities. Note that the second step of KYC is to understand the nature of the client’s activities. In regards to pricing, you can collect information from your business clients about the product range and pricing during the due diligence process. You can also research online to check the accuracy of the data. After you have completed gathering research, you can check transactions against that data to ensure they are in line with expectations. It’s not only the clients themselves that you need to concern yourself with. Who are they doing business with? Third party due diligence policies, screening and processes (Know Your Customers Customer or KYCC) are necessary to mitigate your risk. What is your company’s appetite for risk and what risk does that client pose for TBML? There are certain industries, such as used cars that pose a much higher risk for TBML, or certain countries that pose a higher risk. In these high-risk situations, enhanced due diligence procedures (EDD) are in order to fully check the background, ownership and business dealings of the client. In higher risk situations, an actual on-site visit can illuminate more information about the nature of the client. Combatting TBML Other specific measures to combat TBML, as recommended by the FATF, include: a) Assessing the adequacy of a bank’s systems for managing the risks associated with trade finance activities, including whether the bank effectively identifies and monitors its trade finance portfolio for suspicious or unusual activities, particularly those that pose a higher risk for money laundering. b) Determining whether a bank’s system for monitoring trade finance activities for suspicious activities, and for reporting suspicious activities, is adequate, given the bank’s size, complexity, location, and types of customer relationships. c) Sample testing trade finance accounts with a view to verifying whether the bank is meeting its customer due diligence, record keeping, monitoring and reporting obligations. d) Providing AML training to financial institutions’ global trade services departments and personnel. Allowing financial institutions (FIs) to see more information from exporters, importers, shippers, and authorities would enable them to better perform due diligence and monitoring. As TBML is so widespread, sophisticated, and cross-border, it’ll require coordinated international efforts from numerous agencies, regulators and FIs to successfully combat money laundering. With technological advances, such as distributed ledger technology, the capabilities to monitor complex, multi-part transactions are improving. If regulators across jurisdictions can formulate agreements for better information sharing and improve harmonization of cross-border data, dramatically reducing the scourge of TBML is a strong possibility. Posts navigation Previous 1 … 142 143 144 … 157 Next
Digital technology is flipping the world of identity upside down. That’s why governments and organizations around the world are setting goals and establishing frameworks for rolling out comprehensive digital identity systems. Some have a long way to go, some are closing in and a few others are basically there. Fortunately, the digital identity ecosystem offers new solutions to help meet their needs. The bottom line is this: the future of identity is digital. So which countries and organizations are leading the charge? And what are the implications for the rest of the world? The prospects are both transformative and inspiring. Digital Global Snapshot Countries around the world, as well as businesses and other large organizations with digital identification requirements, are looking to execute and deliver on digital ID plans. One of the most far-reaching examples began in 2014. That’s when member countries of the European Union set out digital ID regulations in the Electronic Identification, Authentication and Trust Services (eIDAS), building a framework for a unified digital ID system across the EU. Within the EU itself, Estonia has emerged as a leader in the digital identity space. Every Estonian has a state-issued digital identity, allowing citizens to easily authenticate themselves for online services without paper documentation or a physical interaction. And just recently, the Australian government launched a new framework for digital identification that will have sweeping implications across the country. Adapting and streamlining the way digital engagements are handled, this framework could be a digital beacon for the rest of the world. The Plan Down Under The Australian government set about their framework to inform and guide a new national system of digital identity. Lead by the aptly named Digital Transformation Agency, the framework has been designed to address the needs of an increasingly digital society with usability, accessibility, security, privacy, fraud prevention and risk management at its core. Generally, the goal is to lay out a roadmap for a digital identity system for all Australians, recognizing the needs and concerns of the digital age. It also aims to set standards for any organization requiring digital identification to access online information or services. To ensure a robust and secure path forward, the Trusted Digital Identity Framework (TDIF) was created in consultation with the financial sector, digital identity experts, privacy advocates and the public. Simplifying Digital ID Currently, the Australian system for accessing online government services is not particularly efficient. Citizens require multiple accounts, logins and passwords and that can readily complicate and confuse matters. The system proposed in the new framework aims to streamline and simplify things with efficiency and greater public service as the obvious benefits. Essentially, a user should only have to prove their identity online one time, with that digital ID granting access to multiple services across any part of the government. The Australian government is aware of some of the other challenges faced by its citizens when it comes to engaging with the government in a digital way. The framework is looking to address a few of those issues. First off, the framework explores ways to remove the barriers for people lacking proper documentation, particularly for those needing to create an online or digital identity. Not everyone has a digital presence and that will need to be addressed. Likewise, corporate and business entities also have relationships and engagements with the government. The framework is offering ideas and solutions to simplify dealings between businesses and government. While Australia has been moving toward this kind of system for some time, this is a significant step in an ongoing process that will no doubt transform the way Australians engage with their government online. In 2013, the government set up the Financial System Inquiry to examine the needs of Australians and the national economy. Their recommendations one year later included a more streamlined, effective and user-friendly system for digital identity. This framework is the next evolution of that process. Others will be watching in earnest how the Australians execute and deliver on their plan. Digital ID Implications Of course, like anything relatively new to the world, the digital space raises serious concerns for some especially the security and integrity of personal and private data. That’s why these identity frameworks are being fleshed out to ensure those concerns are integral to the systems, with a high priority and emphasis placed on safety and security. But there are enormous benefits. In developing countries, for example, a system backed by digital ID technology could be a game changer – and a lifesaver. Traditional paper systems have left a lot of gaps and countless people have gone unregistered or undocumented. Lacking a birth certificate, a passport or other official physical identity documentation also leads to a lack of essential services, ranging from healthcare to financial services. Those problems can even extend into the profound such as denying access to justice or affecting one’s ability to exercise voting rights. These have enormous implications for societies, individuals and families, with children being especially vulnerable. While nations and international bodies look for ways to improve and digitize identification systems, there are also important business aspects. From account creation to authorized payments, digital identification helps to fight fraud and other criminal activities. It can also help companies with their compliance measures, especially KYC and AML – speeding up the process and removing some of the burdens and barriers. Together with your electronic identity verification solution, these new systems of digital ID open up new markets around the world, with greater trust and fewer risks during the verification process. As more and more people and businesses transact online – with the expectation for a ubiquitous and real-time experience – frameworks and systems like those in Australia, the EU and Estonia present new opportunities for companies to provide better services to their customers.
International trade is huge; in 2016, world merchandise exports were valued at US$ 15.46 trillion and the growth rate is projected over two percent annually. Unfortunately, this also creates an environment that’s rife for abuse – trade-based money laundering (TBML) accounts for hundreds of billions of dollars of illegal money flows annually. With sums of that magnitude, it’s no surprise that TBML is highly sophisticated. And, as it hides its activities amongst massive volumes of legitimate trade, it’s difficult to uncover. Techniques such as under- or over-invoicing, falsifying documents, and misrepresenting financial transactions, are difficult to trace as they can involve multiple parties, jurisdictions and transactions. Additionally, true value is often difficult to set accurately. Is someone overpaying on purpose to hide illicit funds or is that what they think its worth? Consider artwork; as art is so subjective, how could authorities prove that the price paid was to hide funds, if everyone involved is in on the scam? Only 35 out of 220 jurisdictions have Anti-Money Laundering (AML) rules that specifically deal with art or antiquities. Of course, there are many other avenues for TBML. What is the proper price for a dress; $30? $300? $3000? Compliance officers assigned the role of uncovering TBML face a distinct lack of information for specifics that can help determine accurate pricing. Even if more information about the quality of the product is available, it’s difficult for compliance officers to be experts in the pricing vagrancies of multiple industries. Complicating the matter is the lack of shipping, import/export, and customs information that would help compliance teams assess the risk of a transaction. They are not privy to the same information that Customs and Border Protection (CBP) has. Due to privacy and confidentiality considerations, some jurisdictions don’t allow sharing information across borders — even within the same institution. In addition, 80 percent of trade activity is so-called open account trade, which is not documentary-based, thus offering no banking documentation to help make determinations. As in other areas of compliance, there’s trade-offs between allowing the free flow of commerce with ensuring that steps to effectively counter TBML are taken. After all, no one wants to unnecessarily burden legitimate trade but we can’t accept unfettered TBML. What’s a compliance officer to do? Know Your Customer While the tactics needed to properly vet against TBML require more extensive analysis, fortunately the overall strategy is well-known – or more precisely Know Your Business (KYB), as we are talking about business entities. Note that the second step of KYC is to understand the nature of the client’s activities. In regards to pricing, you can collect information from your business clients about the product range and pricing during the due diligence process. You can also research online to check the accuracy of the data. After you have completed gathering research, you can check transactions against that data to ensure they are in line with expectations. It’s not only the clients themselves that you need to concern yourself with. Who are they doing business with? Third party due diligence policies, screening and processes (Know Your Customers Customer or KYCC) are necessary to mitigate your risk. What is your company’s appetite for risk and what risk does that client pose for TBML? There are certain industries, such as used cars that pose a much higher risk for TBML, or certain countries that pose a higher risk. In these high-risk situations, enhanced due diligence procedures (EDD) are in order to fully check the background, ownership and business dealings of the client. In higher risk situations, an actual on-site visit can illuminate more information about the nature of the client. Combatting TBML Other specific measures to combat TBML, as recommended by the FATF, include: a) Assessing the adequacy of a bank’s systems for managing the risks associated with trade finance activities, including whether the bank effectively identifies and monitors its trade finance portfolio for suspicious or unusual activities, particularly those that pose a higher risk for money laundering. b) Determining whether a bank’s system for monitoring trade finance activities for suspicious activities, and for reporting suspicious activities, is adequate, given the bank’s size, complexity, location, and types of customer relationships. c) Sample testing trade finance accounts with a view to verifying whether the bank is meeting its customer due diligence, record keeping, monitoring and reporting obligations. d) Providing AML training to financial institutions’ global trade services departments and personnel. Allowing financial institutions (FIs) to see more information from exporters, importers, shippers, and authorities would enable them to better perform due diligence and monitoring. As TBML is so widespread, sophisticated, and cross-border, it’ll require coordinated international efforts from numerous agencies, regulators and FIs to successfully combat money laundering. With technological advances, such as distributed ledger technology, the capabilities to monitor complex, multi-part transactions are improving. If regulators across jurisdictions can formulate agreements for better information sharing and improve harmonization of cross-border data, dramatically reducing the scourge of TBML is a strong possibility.