Month: June 2021

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International Client Verification: Verifying Customer Identity Online

international customer onboarding

The growth of digital banking platforms and online solutions is the key for businesses to grow by onboarding international customers. Remote international client onboarding costs businesses the most time and causes the most problems. Banks that extend their services outside of their domestic region, tend to lack the resources for verifying customer data. Complicated KYC and due diligence processes with tough technological solutions lead to an increased customer drop-off rate. 

Even if a customer wants to sign up with an international bank, financial institution, or any other industry, a complicated onboarding process is never worth their time. To complete the process, organizations need to employ seamless online ID and document verification solutions. There’s no way to manually verify international customer data, online document verification is the key to online document verification.

Accurate international addresses and document verification help reduce the cost of manual verification of data. Being able to verify international data means lower costs and an improved rate of customer onboarding. Using technological solutions like DIRO, banks, financial institutions, and other industries can verify customer data in an instant while reducing friction.

Why Is International Customer Verification Needed?

A business can quickly expand its business reach by building strong KYC techniques and strategies. Employing efficient online customer verification solutions can improve the international customer onboarding experience.

According to surveys and reports, 1 out of every 10 customers drops out of the onboarding process because of an overly complex process, distrust in the process, or just poor customer experience. Some businesses don’t even try to venture into unidentified markets because of their lack of ideal solutions. 

To broaden the customer base and improve the brand reputation, it is vital for brands to onboard customers internationally. It is not possible to do so without the use of a proper online identity verification solution.

Benefits of Online Document Verification

  1. Lower Friction

DIRO online document verification solution can be integrated with your website, the user can be asked for ID Information right there. It can provide instant results for verified documents. This means, no friction, no hold-up time, and little to no burden for the users. 

  1. Reduce Administrative Overhead

Having your team manually request and process ID documents is a time-consuming process. This manual process can be bypassed if documents can be verified in an instant using the business website. Manual document verification, however, requires too much friction and can lead to errors as some documents may be too sophisticated to distinguish by the human eye. 

  1. Improve Security of Customer Onboarding

Using physical documents or online copies of a document can open your business to the risk of fraud. Most documents that are used for verification are unencrypted and can be seen by others. DIRO’s document verification technology is backed by multi-factor authentication and strong impersonation checks that can reduce fraud.

How Does DIRO Enhance International Customer Onboarding Experience?

Even after the best technological solutions, verifying international customers during onboarding is incredibly tricky. There are a variety of factors that can cause friction during international customer onboarding.

By employing DIRO’s customer onboarding technology, businesses can verify online documents in an instant. DIRO can verify 5000+ types of documents from all over the globe. The technology provides 100% proof of authentication on verified documents. The proof of authentication can be used as a court-admissible document with forensic data.

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How Can Ideal Digital Customer Onboarding Lend a Helping Hand In Reducing Fraud?

risk management program

In the last year itself, the FTC (Federal Trade Commission) received over 2 million fraud reports, which led to losses of over $3.3 Billion. Fraudsters can run a scam to trick the onboarding process by exploiting the identity verification program. Businesses, banks, and FIs need to employ the best risk management program to detect and eliminate fraud early on. 

An essential part of any risk management program of any organization is a perfect onboarding program that verifies the identities of people from the first step. Verifying identities using strong online document verification solutions is something organizations need to have.

Preventing Fraud Risk with ID & Business Verification

Identity theft is currently one of the most common types of fraud and growing technologies may keep assisting the growth of ID theft. The sudden increase in ID theft cases is because of sudden data breaches in recent years. These data breaches have provided fraudsters with enough access to data that they can use to assume the identities of someone else. 

Using online document verification solutions like DIRO and employing organization-wide KYC compliance can help prevent fraudsters from entering the inner operations of your system. The ID verification process usually helps in identifying the red flags in the early stages of customer-business relationships. 

Verification methods that can verify customer documents instantly and distinguish between authentic and doctored documents can reduce the pace of fraud. Countless methods can be used and data can be cross-referenced to verify customer identity.

Types of Online Fraud

As a business, you need to understand the techniques used by fraudsters that will help you protect your business. Some of the most common types of online fraud you need to consider to build your anti-fraud management program are:

  1. Synthetic Identity Fraud

Synthetic Identity Fraud is one of the most common types of ID fraud, where real information is stolen from someone else and fake information is blended to create a synthetic identity. Usually, all the real information used to create a synthetic identity is stolen. Synthetic identity fraud makes up 80% of all identity fraud. Being able to spot fake identities is the best way to defend your business against fraud. You need to reduce fraud all the while making sure the customer experience stays intact. 

SIF is designed to go around conventional methods of ID verification. The increased number of data breaches over time has made things worse for both organizations and customers.

  1. Account Origination and Takeover Fraud

Account origination fraud and account takeover fraud are other two types of identity theft that happen whenever a person gains access to an individual’s account. They can use this access to make fraudulent transactions or use their personal information to create fake accounts at different places.

ATO is much more complicated to identify as fraudsters are using legitimate credentials to access the accounts. Companies can lose millions of dollars by not prioritizing a solution for reducing fraud or identifying ATO in the initial steps.

  1. Card-not-present and Chargeback Fraud

Card-not-present or CNP fraud is a general term for fraudulent transactions where a cardholder doesn’t present a card in person at the time of purchase. CNP usually occurs through mobile payments or online, which makes it tougher to prevent and detect fraud.

Chargebacks are a type of CNP fraud that happens when someone orders products or services and requests a chargeback from the bank instead of the merchant. To reduce this type of fraud, implementing an enterprise-wide strategic program is the best bet.

What is a Fraud Risk Management Program?

A fraud risk management program gives your business a foundation for identifying, analyzing, preventing, and mitigating fraudulent activities. Preventing fraud is a lot bigger than protecting revenues, it also minimizes the harm fraud does to a brand’s reputation.

One of the main reasons for fraud risk management offers a positive impact on decreasing the pace of fraud and losses incurred on fraud. Conducting risk analysis offers a greater understanding of the weaknesses of the businesses which can lead to an improved risk management program.

Digital Customer Onboarding with Ideal Technology

Online customer onboarding methods are one of the preferred target areas of fraudsters. Weak customer onboarding methods tend to cause a lot of harm to customers as their information can be used for a variety of fraudulent activities.

Organizations need to build fraud risk management programs that can support online customer onboarding methods. Technological solutions that provide online verification of Identity and documents are needed to mitigate fraud. 

DIRO’s Online Document Verification Solution for Fraud Management

None of the strategies a business can build will help in reducing fraud if there’s no technology to support your business’s needs. Customer onboarding can be made secure and faster with DIRO’s online document verification API.

DIRO can offer instant document verification for customer ID verification which reduces fraud and improves fraud detection and prevention. DIRO’s technology can capture data right from the original web source. It prevents the use of flake and stolen documents, with 100% verification of original data.

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What’s Next for the AML Regulation? Fraud Prevention and AML Compliance

how aml compliance can reduce risk

The landscape of AML regulation is vast and diverse, and to prevent fraud the financial industry needs to keep up with the ever-changing rules and regulations. On January 1, 2021, the National Defense Authorization Act passed a new act containing a variety of defense and national security matters. This act included reforms to US anti-money laundering (AML) and counter-terrorism financing (CFT) laws. 

The new developments in the AML/CFT laws will have a huge impact on the financial institutions and specific other business types. While there are a lot of changes in the AML Act, there few particular changes that financial industries need to keep their eyes on:

  • Creating a non-public registry that tracks the beneficial owners of certain organizations.
  • Enhancing the AML whistleblower program similar to Dodd-Frank Act’s SEC Whistleblower program.
  • Expanding the US regulator’s statutory authority to ask for documents from foreign institutions.
  • Increasing penalties for BSA and AML violations.
  • Establishing priorities and strategies for AML policies
  • Creating an annual reporting requirement to apprise Congress of all Department of Justice (DOJ) settlements including the Bank Secrecy Act (BSA).

The Current AML Landscape

Today, money laundering has reached almost every single industry and market. The scale and the impact of the pandemic are almost impossible to determine, however, the United Nations Office on Drugs and Crime (UNODC) offers an estimate that the money laundered globally is around 2-5% of the global GDP. To put that in context, the annual loss due to money laundering is about $800 billion – $2 trillion. 

To reduce the global fraud loss, the Anti-Money Laundering regulations are set in place. Financial institutions have a legal obligation to monitor their clients and prevent money laundering and report any financial crime the companies detect to the right authority. 

AML laws were made global after the creation of the Financial Action Task Force, the task force works as a money laundering and terrorist financing’s primary enemy. Most of the regulated markets and countries in the world have strict AML laws and regulations, failure to comply with the laws can lead to strict penalties. 

There are a variety of AML regulatory bodies all over the globe, and where the business is situated determines the kind of regulatory body and the kind of international regulations they need to comply with to keep the business running. Businesses that operate within the EU must follow the 6th anti-money laundering directive. 

The Future of AML Compliance

Compliance and regulation all over the world are unpredictable. Fraudsters all over the world are using cryptocurrency and multiplayer games to launder money under the noses of financial regulatory bodies. Anti-money laundering regulations are changing and covering newer markets all the time. To keep up with all the compliances and changes, businesses need to adapt to new standards and protect the businesses from regulation examination and suffering heavy penalties.

The EU recognized the need for stricter regulations on the crypto industry with the 5th AML directive. The new AML compliance stated that cryptocurrency exchanges and the custodian will have to:

  • Perform CDD (Customer Due Diligence) checks as the part of Know-Your-Customer (KYC)
  • Financial investigators can be authorized to obtain the addresses and identities of cryptocurrency owners which eliminates the anonymity and the risk of money laundering from the process. 
  • Cryptocurrency exchanges and wallet providers will need to be registered under relevant regulators in their home country. 

The EU understands that the regulation of virtual currency providers and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions. To efficiently fight the risks that come along with anonymity, the 5th AML directive claims that national financial institutions should be able to obtain information that allows them to associate virtual currency addresses with the identity of the owner. 

Additionally, businesses must understand how to remain compliant with the AML regulations, which is now harder to do as the UK has left the EU. The UK is considered one of the most regulated countries in the world when it comes down to financial institutions. Regulations are becoming even stricter with the Anti-money laundering 6th directive which came into effect just recently.

What’s Next for AML Regulation? 

Cybercrime was mentioned for the very first time in the AML 6th directive, protecting businesses against cybercrime is a tough undertaking. Using the right kind of techniques, businesses can pinpoint and tackle any potential money laundering activity. 

The UK government has advised that eID verification should be the ideal method for maintaining compliance. The money laundering and terrorist funding amendment has made it clear that eID verification is one of the most effective ways to ensure compliance. Using online document verification technologies like DIRO instead of manual document and identity verification is another step that businesses need to follow to comply with the new AML directives.

Newly growing markets and modern forms of verification are becoming subject to regulation. To do everything effectively and reduce the chances of fraud, businesses need to follow all the regulatory body’s advice. 

How DIRO’s Online Document Verification Can Help?

It doesn’t matter where your business is located, you do need to comply with local and international regulations, but keeping up with the ever-changing regulations is a tough task. DIRO’s online document verification can help you achieve what you want.

Our online document verification technology allows businesses to verify documents necessary for complying with AML directives. DIRO’s online document solution verifies documents instantly including the business beneficial owner information. Our API integrated buttons can improve the overall document verification process and lead to a more streamlined AML compliance across all industries.

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How to Verify Proof of Address for Digital Banking Industry?

how to verify proof of address

As soon as the pandemic hit the world, the Federal Trade Commission (FTC) complaints about identity theft quadrupled. Similarly, loan account fraud loss grew from $400 million to $3.4 billion in 2019, and to make matters worse, banks and credit unions are losing more and more money to synthetic identity fraud. Customer identity verification is one of the primary methods to mitigate fraud, and learning how to confirm proof of address is a vital step.

To reduce the losses and mitigate fraud, identity theft, identity verification, and loan approval software need to have stronger ways to protect digital banking solutions. One way to reduce fraud is by learning how to verify proof of address.

What’s the Need for a Proof of Address?

The verification of proof of address has several use cases, be it opening a new bank account, applying for a mortgage, or signing up for digital banking services. Here’s why proof of address verification is important:

1. Avoid Major Risks

Understanding how you prove proof of residency and why it is important is by understanding the industries it will benefit. Efficiently proving consumers’ addresses for businesses like mortgage lenders, eCommerce stores, online marketplaces, and online gaming is to make sure that the customers are who they claim.

Other industries, not just the finance industry, require utility bills for proof of address. Online platforms that book living spaces like Airbnb also use cases of address verification. Since the pandemic, Airbnb has received an increased number of fraudulent bookings. This leads to multiple customers getting scammed out of housing properties. As Airbnb doesn’t know how to confirm proof of address, fraudsters could list any property available for rental and trick customers when they try to sign up. 

Online rental places like Airbnb aren’t the only industry that requires proof of address. Mortgage lenders also rely on residence verification to make sure a customer is who they claim to be. To reduce mortgage fraud, lenders ask for bank statements and utility bills, and borrowers must provide certain documents to lenders for verification.

As mentioned, banks, financial institutions, and FinTechs need to verify a lot of documents to secure themselves from fraud. 

2. Regulations and Security

Frauds cause huge losses to a country’s economy and to reduce fraud regulations have to be followed. You can add verification methods to comply with regulations such as KYC, KYB, AML, and mortgage lending regulations. Following regulations can help you weed out security threats, minimize risks and avoid legal losses and keep providing customers with optimum user experience. 

Verifying proof of residence is a basic requirement for KYC/KYB and AML compliance. Although some regions enforce verification of address more strictly than others. States in the USA where online gambling is legal, require strong proof of address verification. If customers or online gambling agencies do not complete the verification of address proof, it can result in hefty fines.

What Documents Count As Proof of Address?

In the USA, several documents can be used to verify proof of address, here is a list of the most commonly used documents for address verification:

  • Driver’s license
  • Passport
  • Bank Statements
  • Utility Bill

1. Driver’s License

A driver’s license is an official government ID that allows a person to operate a vehicle. Apart from a person’s driving record, a license contains a name, address, and DOB. Although there is a chance that the address listed on the Driver’s license isn’t the current address. 

According to surveys, more than 30 million American residents move every year. According to regulations, every state requires you to update the address proof within 30 days of moving. But most people overlook this requirement which leads to incorrect and outdated information.

Fraudsters can easily trick the verification processes by doctoring the driver’s license using different technology. Sophisticated verification solutions like DIRO’s online document verification capture data such as proof of address directly from the original web source for verification. This means institutions can verify documents even if they are fake.

2. Passport

A passport is another government-issued ID that is used for international travel. It also helps in certifying and verifying the nationality of every individual. Passports don’t have addresses printed on them like Driver’s licenses but a user can pencil in the address by themselves. This can’t act as an official proof of address for government services but can work in certain use cases. 

3. Bank Statements

A bank statement is a monthly document that is provided by the bank to the customers each month. The statement includes all kinds of financial data including what money came in and what went out. This bank statement is a document that can be used as proof of address. Bank statements contain personal information like name, address, and statement period.

To use bank statements as proof of address, they have to be recent or under 90 days. A bank statement older than 3 months can’t prove the recent address of the customer. However, using bank statements for verification of address leaves a lot of room for security risks. 

When learning how to verify proof of address, banks, governments, and financial institutions must provide a sense of security to the customers. According to sources, asking customers to use bank statements as proof of address led to a 30% increase in the customer dropout rate. Bank statements contain sensitive information that customers are hesitant to provide.

4. Utility Bills 

The best method of verifying proof of address is using utility bills. Recently the process of using utility bills for DMV and renewing driver’s license. Now the whole process is becoming digital.

In terms of security and seamless process, the strongest use case of address verification is utility bills. Utility bills provide the most recent address of a consumer. People can forget to update their address on their driver’s license, but just paying the utility bills is enough to provide proof of recency. 

How to Verify Proof of Address with DIRO?

Verifying proof of address is vital for digital transformation and minimizing fraud. DIRO’s verification technology captures data from the original web source and verifies if an address is real or not. 

DIRO’s technology is the only solution globally that can verify documents instantly which leads to an enhanced customer experience. The solution can work horizontally across various industries.

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Handling the New AML Compliance Challenges With Latest Payment Methods

aml compliance challenge

The global prepaid card market will reach $3.65 trillion by 2022. It is also expected to grow more based on the advancement in technologies and with customers slowly moving towards a digital and cashless economy instead of the old methods of cash and cheque. These latest payment methods are crucial for building vital cash flow for businesses and they can even be used for government relief programs. Although, there are a lot of risks involved in these latest online payment methods and for the users who indulge in these payment methods.

Prepaid cards can be filled with money, can be used globally, and are much easier to set up in comparison to other types of cards. Users who utilize these payment methods can be open to exploitation. Hackers who use sophisticated methods can easily take advantage of the anonymity provided by these cards.

Reducing the Risk of New Payment Methods

According to some reports, the fraud revolving around different types of prepaid cards reached around $103 million. This amount of fraud is in the United States alone. Financial services and institutions rely on old, manual, and insecure technology to monitor transactions and verify customer identities to reduce the number of frauds. If a lot of regulations are enforced in place, it will make it tougher for hackers to combat fraudulent card activities.

The best thing is that reducing the risk faced by new payment methods and prepaid cards is not only possible, but it can also be really easy to reduce risks by using the right kind of technology. Making use of automated technology that can give you real-time insights into frauds, reduce false positives, and provide a holistic view of users to improve a positive customer experience.

The best methods of reducing fraud need to have all the components to help you meet up with verification and AML compliance. Technologies like DIRO document verification API can be utilized to verify documents in real-time during the onboarding process and reduce the risk of fraud. Businesses can utilize the DIRO’s document verification technology to improve their chances of reducing fraud.

Challenges Faced To Reduce Risks In Handling the New AML Compliance Challenges

1. Digitization of Products and Complex Payment Streams

Keeping up with new technological advancements is one of the major concerns of financial institutions. In the past, there was a major reliance on manual methods to accomplish tasks, it left a lot of room for error and there was a lot of room for false positives. Manual methods leave the process of detecting financial crime ineffective.

Regardless of constant technological growth, countless steps of operational and AML compliance decisions are made manually every day. Spending resources on unnecessary investigations and using human analysts for every decision costs Financial institutions billions of dollars each year.

2. Increasingly Sophisticated Hackers and Criminal Networks

Financial institutions aren’t the only ones who are utilizing advanced technological methods. Hackers and criminal groups are also improving their methods for scamming people. Almost every new day we see new AML threats arising from digitization, financial criminals are benefiting from this improvement in technologies and they are becoming better.

Criminals make use of complex networks, exploiting weak points in the operations of banks, the latest payment methods such as prepaid cards, and capital markets.

As with most types of crime, when one method of money laundering becomes tougher to accomplish, financial criminals will find newer methods of executing the crime. All types of financial institutions have to update their AML compliance to make sure they stay ahead of criminals.

3. Expanding Volumes of Data

Another challenge that financial institutions face is the volume and breadth of data. There will be more than 175 zettabytes of data used by 2025. However, as the amount of data keeps expanding, financial institutions keep struggling to harness its value.

Criminal organizations often launder money between several networks at the same time to make sure they aren’t spotted by financial institutions. Using machine learning and AI-based technology, banks and other financial institutions can find suspicious activities and reduce the risk of financial fraud.

How Does DIRO Help in Handling the New AML Compliance Challenges?

Following all the latest AML regulations can be a huge task for financial institutions as they keep changing with time. Banks, financial institutions, and FinTechs need to employ the latest payment methods and they also need to utilize the latest technologies meant to increase security.

DIRO’s document verification technology can be used to verify documents instantly. To reduce the risk of fraud, institutions can verify any kind of documents during the customer onboarding process. The technology can verify utility bills, address proof, bank statements, and even student records. To minimize the risk of fraud, these organizations can improve their chances of figuring out suspicious activities and can reduce the risk of financial crime.

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What Is Identity Theft? How to Prevent ID Theft Online?

Identity theft is when someone steals your personal information and uses it for financial fraud. There are multiple types of identity theft and each type can affect you differently. Almost all types of identity theft lead to financial loss. The cases of identity theft are growing every year with the rise of new technology, and people need to learn how to prevent ID theft online. 

There’s no perfect way to protect yourself against ID theft completely. But if you’re diligent in learning how to prevent identity theft, you can save your confidential information from fraudsters. It is always good to learn how to protect your data and act quickly if someone manages to steal your information.

How does Identity Theft happen?

Identity theft is a widely applied term that is used any time someone steals someone else’s personal information. Personal information can be almost anything like the Social Security Number, driver’s license, etc. which can be used to purchase products, create new accounts, and more without authorization. 

As technology and the use of social media are growing, the theft of personal information is always at risk. If you’re not paying attention to your credit file, you may not notice that someone is making a transaction with your details until it is too late. What are identity theft examples you ask? Here are the most common ones:

1. Data Breaches

A data breach happens when fraudsters gain access to an organization’s data. Most data breaches try to gain confidential customer information like full names, Social Security Numbers, and credit card numbers. 

In 2018, there were more than 1,200 data breaches in the USA, and more than 400 million records were exposed. As all of us have more than a dozen accounts with countless services, it is almost impossible to keep you safe from a data breach, however, there are methods companies can employ to mitigate the risks of data breaches. 

2. Unsecure Browsing

Most of us can browse the internet securely, but there are situations where people access third-party websites. Not all websites are secure and sharing personal information on an unsecured website is basically handing out your information to fraudsters. If you use an antivirus, some tweaks in settings can easily help you detect unsafe websites.

3. Credit Card Theft

One of the most common forms of identity theft is credit card identity theft. Let’s say someone somehow got access to your credit card information, they can use it to make unauthorized purchases. Other ways fraudsters can access your credit card information are through data breaches, physical theft, and credit card skimmers in online retail stores.

4. Mail Theft

Mail theft has been around long before the rise of social media and online shopping networks. Identity thieves have been going through people’s identities to sensitive data. Mails contain all kinds of sensitive information like bank and credit card statements or other personal documents. If someone somehow accesses your email account, they can have access to loads of information. 

5. Phishing and Spam Fraud

Some scammers use email and text messages or other electronic communication methods to steal personal information. The common denominator in these kinds of fraud is trying to trick a customer into believing that they are in contact with an organization. 

To put this in context, let’s say you receive an email that claims it’s your bank and it may include a link that directs you to a website similar to your bank’s website. Most of the time these websites will ask you for information like a username and password or credit card information. It is suggested that you call your bank and confirm if there’s an issue with your account. Entering sensitive information on any website can lead to huge losses. 

6. WiFi Hacking

Connecting your computer or smartphone to public WiFi for doing any kind of financial activity isn’t the right decision. Public connections are usually full of hackers looking to steal sensitive information.

If you need to use a public network, use a VPN service, or try to avoid inputting sensitive information like account details, credit card information, etc.. 

7. Mobile Phone Theft

Mobile phone theft can happen to anyone because our smartphones have access to all kinds of information. A lot of people don’t set a fingerprint or any kind of password protection for their apps. If someone steals your smartphone, they can access all kinds of information in your emails, text messages, and financial apps on your phone.

Stealing phones is one of the most common types of identity theft. It is advised to keep your phone locked with a password or a fingerprint. 

8. Card Skimming

Card skimming is one of the least known types of identity theft. Some thieves use a skimming device that can be placed over a card reader on an ATM or a fuel pump. This card reader can be easy to hide. Whenever a customer swipes a debit or credit card on the compromised machine, it either stores the information or transmits it to someone else. After that, anyone can use this stolen information to make unauthorized purchases.

How to Check For Identity Theft?

No one can avoid the possibility of identity theft, but some actions can be taken to learn how to prevent identity theft. To keep an eye out for identity theft possibilities, customers should keep checking their credit reports. In these credit reports, you should always look out for transactions that seem out of place or transactions you don’t remember making. These small anomalies can be a red flag, Here’s how to prevent ID theft online by checking some suspicious signs:

  • You aren’t getting important emails such as bills or checks.
  • You’re getting bills for things you didn’t purchase or services you didn’t use. 
  • You’re denied credit even after having an excellent credit rating.
  • You receive notification of unauthorized bank transactions or withdrawals.
  • Your electronic tax filing is denied. 
  • You receive bills or emails explaining the benefits of health insurance you didn’t apply for.
  • Your account was recently accessed and you didn’t do it. 

How to Prevent Identity Theft?

Firstly people can’t figure out that their information is being stolen by someone else, if they do figure it out, they don’t know what to do. If the credit card or debit card was stolen, you need to contact the card issuer and your bank to put a hold on the card. 

The next step is to go through your credit card report from different credit bureaus to find out any unusual activity. Some banks and credit card providers offer services of credit card fraud alert, you can set that up on your card to prevent identity theft. 

You should also notify the local law enforcement agency to notify them of the crime. In most cases of credit card theft and identity theft, authorities can’t do much but they can write down reports and be on the lookout for suspicious activities. 

Before you report the crime to local authorities, it is suggested that you also reach out to the FTC (Federal Trade Commission) to file a report. The agency will guide you on what steps you need to take and the paperwork to fill out. Being a victim of an identity theft crime can be a horrifying experience, if necessary steps aren’t taken then you can be stuck for months dealing with authorities, trying to get your identity back. 

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AML Compliance Guide: What Are The Best Practices for Anti-Money Laundering?

anti-money laundering compliance

Finding and following effective AML programs to ensure Anti-Money Laundering compliance throughout organizations is crucial for all businesses. Keeping up with effective AML policies, procedures, and utilizing the latest technologies can assist an organization in protecting itself from money laundering. 

However, not every organization follows the best practices for anti-money laundering compliance which can cause problems in the long term. Not following up with proper AML regulations can make the organization susceptible to multiple financial crimes such as terrorist funding, stealing of funds, and other financial frauds. AML regulation also has a subset known as “KYC compliance” that is crucial for businesses as well to reduce fraud.

How can you measure if AML Compliance is successful or not? The simplest way is if an organization never gets fined for non-compliance with AML. Another way to measure successful organization-wide AML compliance is by preventing laundered money into your systems and money from being laundered from your funds. Some of the best AML compliance technologies can be used to implement organization-wide compliance.

If you and your organization want more from the compliance program and want to build systems that can increase compliance efficiency while saving on cost. Then the time is now, constant technological advancements and changes in policies have evolved the best practices for AML compliance without causing increased financial fraud risk. 

Before going deeper into particular steps you can take to improve your organization’s AML compliance, let’s get a better understanding of AML fundamentals. The reason why AML regulations came into existence was to make it harder for criminals to acquire funds for illicit activities. As most of the crimes are committed with the motive of gaining money, if organizations can put a hindrance in the steps, they can reduce crimes like corruption, tax evasion, theft, terrorist funding, etc.

At its core, AML regulations are a vital component of a fair-functioning society. AML compliance is not optional, it is required by law. Businesses worldwide that deal in financial matters need to understand the importance of keeping up with AML compliance and how to do it effectively. In this AML compliance guide, we will list the best practices for seamless compliance.

Best Practices for Anti-Money Laundering Compliance

Each state and country has different regulations, but the best practices for effective AML compliance remain the same. They are set in place to ensure your organization remains safe from financial crimes regardless of the country. 

1. Written Policies

AML compliance is a set of rules and regulations, you won’t benefit yourself by following it loosely. Make organizational policies based on AML regulations, state them clearly, and have them written out for all the staff (executives, staff, and regulators). What are your customer identification policies, what kind of records are you maintaining & what regulations are you following? Building and following strong written policies is the best way to secure your organization from financial crime.

2. Compliance Officer

Almost all banks and financial institutions have a compliance officer who is responsible for KYC & AML programs. It is a standard industry practice to assign one individual to ensure that all the processes are followed and all the information is updated regularly. 

It is better to choose a senior member of the organization to take on the mantle of compliance officer. The person should have a heavy influence on the staff and company matters. A compliance officer needs to have the authority to make others follow them.

3. Adequate Training

All the employees who deal with customers, transactions, or any other financial matters need to be aware of the company policies and procedures. If they don’t know all the legal requirements, the sophisticated techniques used by money launderers, and how to spot red flags, it can cause a lot of problems for your organization. Proper training is necessary for anti-money laundering compliance,

Training your employees is a crucial part of securing yourself from outside attacks. Constant training of employees is crucial for smooth AML compliance. You should stay up to date with any changes in the regulations so your employees can get the training required. 

4. Regular Reviews

It is quite easy for businesses to become compliant with AML regulations. Unfortunately, some banks, financial institutions, and organizations tend to forget about compliance after becoming compliant. Regular reviews are important to keep your organization secure. Some businesses lose millions when they finally figure out a red flag and put a stop to it. Review all key aspects of AML compliance at regular intervals to stay on top of things. 

5. AML Red Flags

Money laundering is all about trying to turn illegal funds into legal funds, there are some patterns and techniques that are commonly used by money launderers. Keeping an eye out for basic red flags can help you improve your chances against fraud.

Here are some common money laundering red flags:

  • Large cash transactions. 
  • A lot of transactions can be a sign of layering of transactions. 
  • A sudden spike in financial activities or amounts.
  • Transactions connected with cash-heavy businesses like gambling. 
  • Sudden international transactions with countries that have huge money laundering activities.
  • Transactions with businesses and individuals that are suspected of money laundering.

These activities can be found during customer onboarding due to diligence checks or regular monitoring processes. All financial organizations must have a baseline during customer onboarding or criteria that a potential customer has to pass to become a customer.

Financial organizations all over the world should have criteria set up for when an individual or an account has to be marked as a red flag. 

6. AML Screening

One of the best ways to reduce risk is by detecting and preventing problematic accounts before they become a financial risk. Doing a thorough identity and online document verification can help in mitigating fraud. If a fraudster manages to get past your initial checks, they gain access to the system and start testing how good your fraud prevention methods are. 

Criminals are becoming smarter and the use of sophisticated technology assists them in tricking banks, financial organizations, etc. Money launderers try to find the weakest points in anti-money laundering compliance and exploit the weak points to hide their source of funds.

To make the fraud prevention system faster, secure, and overall more efficient, businesses need to set up a strong AML screening program. This can happen by accessing and gathering data from government sources, international regulators, and law enforcement agencies. These screening programs can scan for known individuals under suspicion. Figuring out if your potential customers are associated with money laundering, terrorism funding, arms trafficking or PEP lists can help you reduce the risk of future fraud.

7. Risk Management

AML regulations and technologies are ever-changing and keeping up with the modern risk trends is a tough ordeal. To reduce the risks, you can create policies and procedures that can be changed and can be adapted to any situation. 

Risk monitoring and regulation officers are also moving towards a more risk-based approach. In the upcoming years with a boost in digital banking, institutions will need to switch to a more risk-based approach for their customer due diligence checks. This would also mean determining whether enhanced due diligence methods have to be applied. It is one of the best practices for AML compliance,

8. AML Compliance Technology

Hiring a huge team for the manual compliance process isn’t a cost-effective method, plus it leaves room for human error. With the pandemic, more and more banks are switching to digital methods which can help in saving time and money while efficiently mitigating the risk of financial fraud. Using automation, organizations can save time, money, and resources. Choose technologies that improve your existing processes.

  • Pick technologies that have proven results, just having the potential to secure businesses won’t be enough. 
  • Choose technologies that offer a solution to one particular or multiple problems at the same time.
  • Ease of use is another important factor to look into while choosing an AML compliance technology. While automation solves problems, it would be worth nothing if the technology can’t be integrated into existing workflows. 

Choosing automation won’t eliminate your need for human intelligence, some things can only be done using human reasoning capabilities. By assigning data processing to computers, you can streamline the overall process of AML Compliance. 

DIRO’s Document Verification for AML Compliance

Complete AML compliance can’t be reached without the verification of documents. When it comes to online document verification, DIRO’s award-winning technology has set an industry standard. Using DIRO’s document verification technology, banks, financial institutions, etc. can verify documents in real-time. DIRO is one of the best AML compliance technologies available in the market for effective compliance.

DIRO captures original information directly from the web source which can help in distinguishing between original and tampered documents. Not just AML, banks, and other financial institutions can improve their customer onboarding process using online document verification technology. 

DIRO’s innovative solution can help in fulfilling AML compliance by verifying all the required documents. With the help of technology, you can keep up with all the changes in the AML rules and regulations, with regular document verification. 

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What is Blockchain Technology and How Blockchain Works?

What is blockchain technology

Blockchain technology, also known as Distributed Ledger Technology (DLT), helps in maintaining the history of any digital asset immutable and transparent. The technology uses decentralization and cryptographic hashing to make the data unchangeable and transparent. While blockchain is widely popular in the cryptocurrency industry, other industries don’t know what is blockchain technology or how blockchain works?

A simple way to define blockchain technology is like Google Doc. Let’s say that you create a Google Doc and share it with a bunch of people, the document is distributed instead of transferred. This sharing of documents creates a decentralized distribution chain, which gives everyone access to the same information at the same time. Everyone can access the information and data at any given time, not a single person is in charge of changing and sharing the information.

As all the involved parties can see the changes being made in real-time, transparency of data is ensured. If you’re wondering how does blockchain secure data, then you should know the technology follows certain protocols that make the data extremely secure. Using blockchain for fraud prevention is an idea that’s been thought over a lot in recent times. 

While blockchain technology is much more complicated than a simple Google Docs file, it does help in giving an idea to users how blockchain works in banking. Sooner or later, blockchain technology will be integrated into almost every industry.

How Does Blockchain Work?

The main purpose of having blockchain technology is to let people share data, share data in a secure and immutable way. Blockchain technology works on three fundamental principles including blocks, nodes, and miners. 

  1. Blocks

The term blockchain consists of two things, blocks, and chains. Every chain consists of several blocks and it contains 3 main elements:

  • The data in the block.
  • A 32-bit whole number called a nonce, the nonce is randomly generated whenever a new block is created, which then leads to the generation of a block header hash. 
  • The hash is a 256-bit number embedded into the nonce, it has to start with a number of zeroes. 

When a new chain is created, a nonce generates the cryptographic hash. The data in the block is signed and tied to the nonce and has unless it is mined. 

  1. Miners

Miners keep creating new blocks on the chains using a process called mining. In a blockchain every block contains its own nonce and hash, it also contains the hash of the previous block in the chain. Mining for new blocks isn’t easy, especially on large chains. Because the nonce is only 32 bits and the hash is 256, there are billions of combinations till the right combination is found. Whenever the miners find the right combination, a new block is created and added to the chain. 

Making changes to previous blocks in the chain requires re-mining, not just the block with the change but all of the blocks that come after. This is why it is highly complex to manipulate any data on the blockchain. This is how blockchain works in banking, and it is crucial for banks to employ the technology to ensure the safety of data. 

  1. Nodes

One of the most important concepts in blockchain technology is decentralization. Not a single computer or organization owns the chain which makes the information on it transparent. It is an online ledger via nodes that are connected to the chain. Nodes are any type of electronic device that keeps the copies of the blockchain and keeps the network under operating health. 

Combining publicly available information with a variety of checks and balances helps the blockchain maintain integrity and creates user trust among users.

The Rise of Blockchain’s Technology

Most people define blockchain technology as its use in cryptocurrencies. Cryptocurrencies are a type of online currency or online tokens such as Bitcoin, Ethereum, or Dogecoin that can be used to buy goods and services. Just like any digital type of cash, crypto can be used to buy anything from as small as a lunch to as big as a car. Cryptocurrency is not like cash, crypto uses blockchain to operate as a public ledger and as an enhanced security system, so all the online transactions are recorded and secured. 

As of right now, there are around 8,000 types of cryptocurrencies in the world and they have a market value of $1.6 trillion, with Bitcoin being the market leader. Cryptocurrencies are slowly becoming more popular over the years among investors. Here are some of the reason why investors are becoming more and more interested in cryptocurrencies:

  • Blockchain’s security makes the theft of data and information almost impossible as almost all cryptocurrencies have their own indisputable and identifiable number which is attached to one owner. 
  • Cryptocurrencies don’t operate under individualized currencies and central banks. With blockchain, crypto can be sent anywhere in the world without the need for currency exchange or without the interference of central banks. 
  • More and more firms are coming around to the idea of blockchain-based technologies. In February 2021, Tesla announced that they would invest 1.5 billion into Bitcoin and accept Bitcoin as payment of its cars.

How Blockchain Works In Banking?

Apart from cryptocurrency, blockchain technology can also be implied in other industries. Not a lot of people know how blockchain works in banking. Banks and financial institutions can store customer data on blockchain to make sure the confidential customer information stays secure. 

DIRO’s online document verification technology can verify documents instantly. Banks can use the technology and verify customer identity and improve the overall customer experience during remote customer onboarding. DIRO’s technology places verified customer documents on the blockchain to make the information secure and immutable.

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What’s the Importance of FinTech in Banking Industry?

The banking industry is in dire need of digital transformation as customer demands are changing drastically. No customer has the luxury of time to wait for multiple days for the completion of the smallest of processes. FinTech or financial technology is important for the digital transformation of the banking industry and financial industry. FinTech companies develop customer-centric financial solutions that help in changing the major operations in the banking industry. By utilization of FinTechs, banking has been made faster, simpler, and more secure than ever. 

FinTech like online identity verification solutions and online document verification solutions can help banks to minimize the risk of financial fraud, money laundering, stealing, embezzlement, and identity theft.

What Do You Need to Know About FinTech & Banking?

Long before FinTechs came into existence financial institutions and banks used to offer basic banking services such as bank accounts, loans, credit cards, mortgages, etc. While the banking services remain the same, they have become more secure than ever. Although customer needs and demands have changed over time and now they need more complex banking services like payment processing options, fraud management, financial guidance assistance, and every aspect of traditional banking available digitally. 

While banks aim to provide a central banking platform for their customers for a number of services, FinTechs companies usually offer targeted financial solutions. These tailor-made solutions usually solve the most problematic part of banking for customers. To get a more descriptive idea of how FinTechs work, you can look into some of the major FinTech providers and how they assist in improving the digital banking experience.

All thanks to open banking APIs, banks can work alongside FinTech organizations to build solutions that can streamline the digital banking experience as simple, secure, and friendly for customers as possible. The role of FinTech companies is very important in the banking industry as they are trying to make customer finances as secure as possible. Banks usually work alongside FinTech providers so they can assist them in building helpful solutions.

Difference Between FinTech and Banks

If the banks are the financial institutions that provide customers with the freedom to manage their finances, what do FinTechs have to offer? FinTech is the development of financial technology that makes sure to improve the customer banking experience using a variety of digital solutions.

Some common FinTech in the USA banking industry are:

  1. Bank of America’s Erica

Bank of America’s Erica is a virtual financial assistant that helps customers manage their finances. It makes use of artificial intelligence and machine learning, personal assistants like Erica allow every customer to receive personalized guidance regarding their finances and any services they need to use.

  1. Venmo

Payment apps like Venmo allow consumers to send and receive money in an instant via ACH payments. This particular FinTech has changed the way transactions used to happen, customers can now send money to each other or make payments at local shops without having to use cash.

  1. Robinhood

Robinhood is a well-known investment app. FinTechs make banking operations easier for customers. Robinhood helps customers to manage their investments for free online or by using a mobile app, which makes it easier to control the finances of the future.

How are FinTechs Changing the Banking Industry?

As times are changing, banks are being forced to switch to a more customer-centric banking experience. Banks also need to adapt to better technologies to deliver their services. Digital solutions that are built by FinTech companies must aim to change one particular aspect of traditional banking. If banks don’t utilize new technologies, they are at risk of losing customers to institutions that offer better technologies.

This increased competition in the financial sector benefits customers as they are always getting better services. Because FinTechs are developing newer technologies it makes it easier for customers to utilize their banking services. The banking industry has drastically improved its services by incorporating innovation into technology.

Every FinTech firm has something different to offer to customers, banks usually use a blend of multiple technologies to grow their customer base and brand value. The best part is that customers get to experience seamless digital banking with greater confidence in data security.

How Will Fintech Change the Future of the Banking Industry?

Banking has changed drastically from a decade ago all because of changing consumer trends. Over time it has helped streamline the digital banking transformation. Customer expectations to manage every single aspect of their finances on their smartphone have also increased and banks are trying to keep up with the customer demands. Artificial intelligence and machine learning are major aspects of improving the overall customer experience. Technologies keep evolving, ensuring that customers get only the latest and greatest experience.

How Does DIRO as a FinTech Improves Banking Experience?

Security is the most important aspect of online banking, while digital banking is convenient it also makes it easier for fraudsters to steal money, customer data, and other sensitive information. DIRO online document technology aims towards improving multiple aspects of digital banking.

With the integration of online document solutions, banks can verify onboarding customers’ identities in real-time, making the process smoother and more secure. Banks, financial organizations, and other companies can easily comply with KYC and AML regulations. That’s not all, DIRO verification technology assists in reducing fraud by placing verified information on the Blockchain, which makes the documents immutable.