Month: March 2022

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Identity Verification Process for Crypto Exchanges

crypto exchanges

Since the beginning of 2021, cryptocurrency exchanges have been growing at an alarming pace. And there are over 100 million crypto users in January 2022 itself. While the market has slowed down, the crypto industry is still growing, and chances are there will be another huge spike in the number of customers. 

To handle these increases in trading consumers, crypto companies need to have infrastructure and technology. Compared to stock markets, and other exchanges that have had several years to build a proper infrastructure, these companies don’t have the infrastructure to handle customer transactions. Even though there has been a crypto downturn, the market is expected to turn back again.

This is why crypto exchanges need to have an identity verification process. Most of the time, this makes the onboarding process tough for customers. These ID procedures, if not completely automated, slow down the customer onboarding process, which leads to an enhanced customer drop-off rate. 

In this article, we will mention how some of the best crypto exchanges handle the ID verification process. What steps are they using, and how easy it is to sign up for the customers.

Best Crypto Platforms with Identity Verification

1. Coinbase Verification

Coinbase was founded in 2012, and it’s a US-based digital currency and wallet platform. It has over 56 million users and has traded over $335 billion worth of digital currencies in the first quarter of 2021. In late 2021, the company went public, which is the first platform to do so. 

While Coinbase has some account limitations, these limits are determined based on the level of verification that’s added to the account. These include account age, purchase history, payment methods, and other factors. 

The type of verification that Coinbase offers includes phone number, personal details, and photo ID. If you live in the USA, then you’ll also be asked to provide your SSN. 

2. Kraken Verification

Kraken is a US-based crypto exchange platform, and it was founded in 2011 and has over 50 currencies. Kraken claims that they’re one of the largest Bitcoin exchanges in Euro volume. The exchange has four levels of accounts with each one of them offering a different type of verification requirements. The levels are:

  • Starter
  • Express
  • Intermediate
  • Pro

The account levels depend on the level of access your account will have. Each level offers more funding options and higher limits with Pro being the highest level. 

A user must be at least 18 years old to register and use an account. All the accounts need an email address, full name, date of birth, phone number, and postal address for verification purposes. Except for starter accounts, they also need to provide employment information and SSN.

The intermediate and Pro accounts need to provide a valid ID, proof of address, and a face photo. Pro accounts need to fill in the KYC questionnaire. 

3. Binance Verification

Binance is a famous crypto exchange platform that combines digital technology and finance. According to Yahoo Finance, Binance is the world’s biggest crypto exchange when it comes to trading volume. 

Binance has three levels of verification with respective deposit and withdrawal limits:

  • Basic: Requires name, address, date of birth, and nationality, and has a lifetime limit of USD 300.
  • Intermediate: Requires an uploaded picture of ID documentation such as passport, ID card, or driver’s license.
  • Advanced: Requires proof of address documentation such as bank statements and utility bills.

4. Bitfinex Verification

Bitfinex is another crypto exchange that came into existence in 2012. They state that they’re one of the largest exchanges by volume for trading Bitcoin against the US dollar. It offers exchange trading for 38 currencies/tokens and also provides margin trading, margin funding, and an over-the-counter market for large trades. To withdraw or add fiat currencies to an account, ID and document verification are needed. Most of the time, this verification process takes up to 2-3 days. 

Although, a user can easily deposit, trade, and withdraw cryptocurrencies immediately upon account opening with a basic account that only requires a valid email address. Individual account requirements tend to differ on the type of account you’re choosing:

  • Age: you have to be at least 18 years old to have an account
  • Personal Information: A user’s telephone number, email address, and residential address
  • Identification: Two types of government-issued ID with photo, such as passport, national ID card, driver’s license, residency card, employment permit card

5. OKEx Verification

OKEx was founded in 2014, and it’s one of the biggest digital currency exchanges by trading volume. It serves millions of users in over 100 countries and it operates out of Hong Kong. At OKEx, the identity verification process contains a couple of rules and procedures that facilitate a secure trading environment for our users, who need to perform ID verification for the following activities:

  • Buying currencies on OKEx with fiat currencies, for which users may need to perform ID verification
  • Making daily crypto withdrawals of more than 10 BTC

OKEx doesn’t require identity verification for users to deposit or trade crypto on OKEx. For individuals, there are several levels of ID verification:

  • Level 1: In level one, the users are needed to enter their nationality, name, and document identification number
  • Level 2: In level two, users are required to verify themselves with photo identification, and they’re also needed to perform facial verification.
  • Level 3: After completing the first two levels, users have to read the disclaimer on OKEx’s mobile app or web page to complete the third level of ID verification.
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Understanding Electricity Bill Verification

Verify electricity bill

Businesses should never undermine the importance of utility bill verification. Electricity bill verification is the first and foremost step in an exhaustive identity verification process, especially for companies dealing with financial data. The threat of identity theft is ever prevalent in the industry, and the only way to keep customers and businesses safe is with the verification of customer documents. Utility bill verification is directly related to identity verification and it should be handled with utmost care.

Businesses of today now have to comply with tons of rules that ensure safety and security for all. When businesses comply with these rules, they prevent fraudsters’ access to a firm’s internal systems. To make sure customers are who they claim to be, a valid ID and address proof are needed. Water or electricity bill verification can easily fulfill the demand for proof of address verification.

Facilitating Identity Verification Through Utility Bills

Even in developed countries, how to handle financial information easily is scarce knowledge. A huge number of people living in rural areas don’t have access to important financial institutions such as banks and FinTech services. 

Before a customer signs up with a bank or a financial institution, they need to perform a series of checks. Formally, these checks are known as Know Your Customer Verification (KYC). As most people don’t have access to the right set of documents, they end up being rejected by the banks. Most banks and financial institutions ask for two documents before onboarding a customer:

  • Government-issued ID document
  • Proof of address document 

There are rare cases where businesses require additional documents to verify a customer’s identity. In those cases, the business has its own set of rules and regulations that a customer needs to follow. 

In most cases, banks need only two documents. In 80% of areas, utility bill verification is the most logical step for proof of address verification. Electricity bill authentication does so much more than provide access to a customer’s address data, it also helps businesses in understanding a customer’s paying habits and behaviors. As most people have access to an electricity bill, it’s the most convenient way to verify their address proof. This is why more businesses should focus on verifying electricity bill.

 Besides, businesses can use electricity bills to prevent risks, and it also helps in strengthening relationships with customers. This shows customers that a company cares about providing a certain degree of security to the customer’s personal information. With increasing pressure and complicated compliance from regulatory bodies, businesses need to build compliance solutions that are as secure as possible. Online electricity bill verification provides essential help for businesses and customers.

Methodology for Electricity Bill Verification

While using electricity bills for verifying a customer’s residency sounds easy, it requires a lot of effort. Instead of relying on manual resources for the verification of customer data, businesses should choose technologies. DIRO electricity bill verification API can enhance your verification process. Here are some of the basic things that a business can verify using an electricity bill.

1. Identity Verification

An electricity bill can also be used to prove a person’s identity as it mentions their legal name. So, businesses of every type can be sure that the customers are who they claim to be, and not someone who stole ID documents.

2. Residential Address

An electricity bill is the best way to verify a customer’s address data. A utility bill is a primary source of verifying a customer’s residency. Businesses can use utility bill verification to gain insights about the customer and prevent fraudsters from accessing a business’s services. Plus, in case of fraud, businesses can track down the fraudster and safeguard themselves from any penalties by showing the needed data.

3. Payment History and Habits

Another benefit of using an electricity bill for customer verification is to gather a customer’s attitude towards their payments and habits. If a customer has tons of due utility bill payments, it shows that a customer doesn’t handle their finances well. So, businesses, especially those offering loans and credit cards should use utility bill verification.

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What is Open Banking, and How Will it Impact You?

impact of open banking

Open banking is pretty simple yet completely innovative, it lets you share your bank data with other companies with limited problems. Open banking APIs or the overall process is designed in a way that provides more security and reliability even while using basic financial services like Venmo or Robinhood. With the widespread adoption of open banking, you as a customer will be able to experience the best technologies without having to compromise for cheaper and less secure options. 

In the US financial market, Open Banking is just taking baby steps. But the UK market is leading the world in open banking-based financial products and services. For both banks and customers, open banking can open up new avenues and create opportunities for you and your money. Here’s everything you need to know about open banking and how it can affect your financial lifestyle.

What is Open Banking?

Open banking, also known as “open bank data.” is a financial practice that offers third-party financial service providers open access to consumers’ banking, transaction, and open financial data from banks and non-bank financial institutions, using application programming interfaces (APIs). Open banking will allow the networking of accounts and data across institutions to be used by consumers, financial institutions, and third-party service providers. Open banking is pushing innovation which can lead to the transformation of the banking industry. 

Here are the key factors for remembering open banking:

  • Open banking is a banking system that allows access and control of consumer banking and financial accounts by leveraging third-party applications. 
  • Open banking has the power to reshape the current level of competition in the banking industry and improve consumer experience tenfolds. 
  • Open banking can enhance the potential for both promising gains and financial risks as customer data is shared more widely and excessively. 

What’s New in Open Banking?

On 9th July 2021, the White House issued a statement in the favor of open banking. President Joe Biden issued an executive order which included a provision encouraging the Consumer Financial Protection Bureau (CFPB) to issue rules that allow customers to download their bank data and offer it to competitors. 

The CFPB is tasked to create regulations related to sharing and consumer financial account data online. Joe Biden’s encouragement to Open banking provides CFPB with the required push to boost the task that CFPB was already doing. 

In October, CFPB issued an advanced notice of proposed rulemaking, related to building regulations around consumer data sharing. CFPB, which had been focusing on the issue for several years, has collected customer feedback on customer data collection. New rules could still take years to implement. 

Years ago, the only way to keep track of the comings and goings of your money was through a monthly mailed bank statement and physical checkbooks. This process has now improved as customers can log into a mobile banking app or website to check on their finances and conduct all kinds of financial activities in one place. For the experience to work well, you need to hand over your keys to the digital portal, your bank account which then allows your app to grab the data for you. It’s also known as screen scraping, and it provides all the information available in your bank account to other companies. And obviously, it’s one of the least secure options available. 

Over the years, several banks have been accused of blocking companies from collecting data when you wish to share it with them. FinTech companies have often complained that banks and financial institutions are anti-competitive, while banks state that they’re just trying to protect their customers and their data from parties that can be a threat. 

Recently, the situation has changed and FinTechs and Banks have made arrangements for better data sharing among themselves. But there is still confusion if consumers are sharing enough data to support the open banking models.

What Will be The New Opportunities with Open Banking?

Open banking is meant to share customer data in a safer and more secure way compared to just handing over your login credentials to a third-party app, including other bank apps. All the data sharing happens behind the screen so you won’t notice it whenever you log into the bank app or conduct any normal financial activity.

The customer doesn’t have to do anything different, it’s just a newer and faster model of data sharing. Customers still have an app on the phone, the only thing that’s different is the level of security you get and you can be sure that your data is kept safe.

The ability to easily share your financial data with other companies is expected to boost innovation throughout all financial industries. It could also help more people get loans by verifying transaction history instead of checking credit scores. Open banking can also improve the mortgage application process, and reduce the time taken for approval of mortgages.

The widespread adoption of open banking can make huge changes in financial services. Open banking requires financial institutions to spend more money and rethink new ways of securing assets and customers’ data.

How Will Open Banking Affect Customers?

In the end, open banking is designed to make financial activities simpler for you to switch lenders and use tons of FinTech apps. Whether it’s access to a cheaper type of credit, managing personal finance, or accessing better direct payments. There are tons of things that customers can do to make their money more automated and all of it revolves around customer data.

Here are some key points that open banking will improve:

  • Increasing access to financial services
  • Saving time from opening an account or taking out a loan
  • Offering better products and services

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How Do Mortgage Lenders Check & Verify Bank Statements?

how do mortgage lenders verify bank statements

If you seek a mortgage for buying a new home or for refurbishing, it has to be approved by a mortgage lender for you to get your loan. One of the major factors involved in loan approval is the verification of the borrower’s financial information, but how do mortgage lenders verify bank statements for loan approval?

Banks and other financial institutions may demand a “proof of verification deposit” form to be filled in and sent to the borrower’s bank for process completion. A proof of deposit may also require the borrower to provide a minimum of 2 consecutive months’ bank statements. During the loan approval process, if you’ve ever wondered “why is verification of bank statements for mortgages required?” the answer is to reduce the chances of people with fake documents acquiring funds for illegal activities.

With thousands of sophisticated technologies out there, it doesn’t take more than minutes to forge bank statements and other documents. Keeping this in mind, mortgage lenders are legally obligated to identify and authenticate bank statements.

In recent years, there have been multiple instances where mortgage lenders have been scammed out of their money with fake bank statements. To save themselves from such cases of financial fraud, mortgage leaders need to find ways to check and verify bank statements.

Understanding How to Verify Bank Statements?

To approve a mortgage application, mortgage lenders need to verify a series of details. These include current income, assets, savings, and borrowers’ creditworthiness.

During the process of applying for a mortgage for a property purchase, the lender can and will ask the borrower for proof of deposit on the property. The lender then is asked to verify that the funds required for the home purchase have been transferred to a bank account and are now can be accessed by the borrower.

Proof of deposit is the only way for a mortgage lender to verify if any sort of transaction has taken place before applying for the mortgage. Proof of deposit serves another purpose for the lender. Using the proof of deposit, the mortgage company can verify if the borrower has enough funds in their account to make a downpayment. If they have insufficient funds, it’s generally considered a red flag during the lending verification.

Usually, a borrower pays a 20% down payment for the home. If the full cost of the home is $200,000 then the borrower will need to pay $40,00 upfront. The lender has to verify if the borrower has enough in their account to make the closing costs that are included in a new mortgage. 

The borrower has to provide the lender with the two most recent bank statements to confirm they have enough money for a downpayment. The mortgage company then reaches out to the borrower’s bank to verify if the information available on the bank statement is authentic or not. This is one of the most common ways how to verify bank statements during mortgage approval. The digital age has made it easier for fraudsters to fabricate fake bank statements and documents which can be hard to distinguish from original statements.

Types of Documents in Mortgage For Verification

A lender has to submit a POD (proof of deposit) form to a bank to receive the confirmation of the loan applicant’s financial information. There are other ways a lender can verify if the borrower’s financial information is authentic or not. Although the document required for verification can differ from bank to bank. Here are the most common types of documents in mortgage approval:

  • Account number
  • Account type
  • Open or closed status and opening date
  • Account holder names (these are the official owners of the account)
  • Balance information. (Including current account balance, account balance over two months/periods, or average bank account balance)
  • Account closing date and the balance at the closing time (if required).

A lender has the right to refuse a mortgage if the documents don’t satisfy the verification requirements.

Why Verification of Bank Statements Is Needed?

Why do mortgage lenders need bank statements? To reduce the risk of the use of acquired funds by the borrower for illegal activities such as terrorist funding or money laundering. Lenders have the right to ask for a borrower’s bank statements and seek POD from the bank, some cautious lenders can ask for both of them. Lenders use POD and bank statements to ensure that the person is eligible for a mortgage.

Some lenders tend to ignore a once-in-a-lifetime overdraft on the borrower’s account during the account history verification. Although if a consumer has numerous overdrafts then giving a loan to consumers may be considered a risk for the bank.

Importance of Frictionless Lending Process in Banking

Removing friction from the lending process has been one of the biggest challenges for banks. The latest report suggests that banks that have been using digital methods for lending have seen better customer-business relationships.

Digital methods can help banks address the pain points customers face during their lending journey.

The banking industry has seen an upward growth toward digital adoption in the past 5 years. But, the lending industry has been left fairly untouched till now.

Consumers want the same level of convenience while lending as they get with other parts of their financial journey. Banks can do a lot of things to make sure that the lending experience is as seamless as possible.

How Banks Can Make Lending Frictionless?

FinTechs all over the world are offering incredible solutions that banks can leverage. Take DIRO’s online document verification solution, for example. It can cut down the customer verification time by more than 70%.

100% proof of verification combined with reduced time can lead to a great customer experience. Here are some things that financial institutions can do to reduce friction in lending:

1. Keep a Customer-Centric Approach

More and more customers are moving to digital banking channels. Banks have quickly transformed to keep up with demands. Most customers want all their borrowing data in a single place, especially if they trust their bank. 

More than anything, a customer wants convenience and a time-saving process. Banks need to do more than just build an online lending application. If the process is too complicated, or way too long, then customers won’t fill it. 

A financial institution’s approach should be focused on making a customer’s journey easy. 

2. Make Use of Established Trust

While FinTechs offer better options, more control, and flexibility, customers are more likely to approach a bank for borrowing. The reason is simple, banks have a better reputation than newly set-up FinTechs.

Over 40% of customers would always choose their bank for borrowing, 27% are not sure, and others may incline toward FinTechs. This data comes from a report conducted by DepositAccounts. 

Financial institutions should look forward to leveraging their reputation while working with consumers. They can use their existing platforms, integrate the latest tech into them and make them more consumer-friendly. 

The rest of the stuff is what banks have been doing for years, I.e., compliance, customer financial health management, mitigating credit risks, and more. 

3. Leverage Technologies

As customers want convenience, there’s nothing better than using technology. To build a frictionless lending experience, financial institutions need to focus on building a flexible, cloud-based platform that can support all kinds of integrations. 

Using open banking APIs allows banks to merge all the sections of the process into a single platform. Without these technological advancements, banks will be left behind in the past while FinTechs win the race.

If a financial institution can implement these strategies, it’ll be able to offer its customers what they want.

How does DIRO Verifies Bank Account Statements?

As we mentioned above, it is getting easier and easier to fabricate fake bank account statements. With DIRO, you can verify bank statements with automated user consent and secure impersonation checks anywhere across the globe. DIRO can verify all account information including bank statements. Banks, financial institutions, and FinTechs can verify these statements using the DIRO bank verification service.

DIRO’s incredible technology can verify any kind of bank document using simple steps. All a user has to do is log in and verify bank statements online on a secure browser. It facilitates improved user experience, reduces the risk of financial crime, and instant bank verification. 

That’s not all you can use DIRO’s document verification technology for, users can access and verify any kind of bank information from any web source. One of the major ways to verify bank accounts is by processing micro-deposits, DIRO’s technology reduces the account verification time from 3-5 business days to mere seconds.

Mortgage lenders, banks, financial institutions, and FinTechs can make use of the DIRO’s award-winning document verification technology to streamline their process of bank account and bank statement verification.

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Understanding NFC Payments: The Complete Guide

NFC Payments

Near-field communication (NFC) uses radio waves that are similar to radio frequency identification (RFDI), to read and send information between two NFC devices. NFC technologies are mostly used in warehousing labeling and they’re incredibly helpful in tracking applications for simple inventory scanning of shipments, products, and customer orders. NFC is even used in automated toll booths to collect information from crossing vehicles. 

In the FinTech environment, NFC payments lead to contactless, encrypted, and streamlined payment methods. This payment method removes complexity from the process by eliminating the need of carrying cash, credit, and debit cards. Customers can use their smartphones to make purchases. NFC payments are relevant today with growing health and safety concerns.

While NFC technologies are pretty similar to RFID and Bluetooth technology. However, there are some major differences between how the technology is used in the FinTech environment. NFC payments in the FinTech landscape to ensure a streamlined and highly secure checkout process.

What’s an NFC Payment?

Not a lot of consumers know about NFC payments, chances are that you’ve seen these payments working in real-time. It could be advertisements, in person or for some person waiting in line in a store. With contactless payments becoming more and more famous, NFC payments are becoming a common method among consumers. 

NFC payments are contactless and secure payments that use NFC technologies to exchange data between an NFC reader and an NFC payment device. Some common examples of these NFC payment devices are Apple Pay, Google Pay, eWallets, and EMV cars. NFC readers are the payment processors that you can use to make contactless payments anywhere. For an NFC payment to work, both the devices should be equipped with NFC chips.

Apple introduced Apple Pay with the launch of the iPhone 6 in 2014, and it quickly became a sensation. Some consider Apply Pay to be the birth of NFC payments. Since then, most smartphones come equipped with an NFC chip.  When two devices with NFC chips are in close proximity with each other, radio waves transmit data to and from each other to complete a payment instantly. You have to hold your device close to process the payments because the NFC chips inside each device only work when they’re in close proximity to each other.

RFID can transmit data from up to 100 meters away, but the frequency used for NFC payments ensures you must be close by to communicate between devices. This makes sure that NFC chips nearby are unable to transmit data for secure payment processing.

Are NFC Mobile Payments Secure?

If you compare NFC payments to debit and credit card payments, they’re equally as secure. Here are some factors that will help you understand how secure NFC payments are?

  1. Device Proximity

NFC payments rely on a radio frequency of 13.56 MHz, and NFC payments happen only when two devices are incredibly close to each other. Consumers don’t need to worry about someone intercepting the signal to interrupt payments or steal data. 

  1. User Initiation

A user needs to activate NFC in their device before making a payment. Users can secure this NFC activation process with a passcode, fingerprint, or facial unlock. This makes the NFC payments process extremely secure. 

  1. Secure Element Authentication

This is what makes NFC payments incredibly secure. Once a user approves that they’re making an NFC payment, the data is transmitted and validated via a separate physical chip or cloud element known as the secure element. Secure elements are protected by a unique digital signature that relies on an OTP to move requested data.

  1. Encrypted Information

Any transmitted NFC payment information is encrypted and secured, this means a specific account or amount details can’t be hacked or cloned.

Why Should You Use NFC Payments?

There are several reasons to use NFC payments, the first being convenience. Businesses that use NFC payments are promoting themselves as NFC payments being their primary checkout process. Not just that, they allow customers to make payments without limiting them to cash, and card payments.

  1. Security

As with any electronic payment process, consumer security is the first and foremost concern. NFC payments are highly secure for both consumers and businesses. They leverage an identity verification required to even initiate payments.

  1. Payment Speed

Speeds of NFC payments are almost instantaneous similar to credit or debit cards. It takes just a few seconds for the information to be transmitted. This information is read by a secure element for authorization to process the payment. 

  1. Convenience for Consumers

Consumers can now use smartphones to send and receive money. Most smartphones launched today come equipped with NFC chips, so they can make contactless payments. With NFC payments, consumers can make purchases even if they don’t have cash or cards with them. 

Future of NFC Payments

Once NFC payments became a common practice, several services that revolve around NFC payments popped up in markets. The preference of NFC payments are at an all-time high. It only makes sense for mobile payment options to be available to consumers. There’s no need to carry debit or credit cards when you already have cash with you.

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What Risks Cryptocurrency Holds to Financial Institutions and the Regulatory Landscape?

risks of cryptocurrencies

Cryptocurrency is a digital currency that’s intended to be used in buying or selling goods and services. Cryptocurrency comes in multiple forms, and it can disrupt the financial institution. As the utilization of cryptocurrency increases, so do the risks to the financial industry. The risks may include fraud losses and regulatory compliance. Fortunately, the Anti-Money Laundering act of 2020 (AMLA 2020) requires the Bank Secrecy Act to be implemented throughout the crypto industry. As crypto exchanges are being used for the sale and purchase of goods and services, the crypto businesses are now considered Money Service Businesses (MSBs). As crypto exchanges are being considered as MSBs, it states that crypto exchanges have to follow:

  • The travel rule
  • All the BSA Regulations including CDD, SARs, CTRs

How regulators will implement these regulations will be the next step moving forward. Several methods can be applied to the financial services industry to make sure that compliance is followed as per the regulatory directions.

Crypto’s Risks to Financial Service Industry

There isn’t any way to bring change in the industry without a significant amount of risk. The reason behind the huge amount of risk in the crypto industry can be credited to the widespread adoption of poor AML, KYC, and other fraud prevention methods. The reasons for this are multiple:

  • Enhanced Due Diligence (EDD) isn’t required on crypto exchanges or ATMs at this time. 
  • Regulators have to build new regulatory guidelines within the AMLA 2020 that requires crypto exchanges to operate as MSBs, although crypto exchanges don’t fit perfectly into the current framework. Additionally, crypto exchanges/ATMs being categorized as MSBs allow anonymous transactions of up to $1,000. Unless these customers exceed the $1,000 limit, then the only information required is limited to a phone number or email address. 
  • Crypto exchanges don’t fit into the definitions of MSB because they’re more like a financial institution in the way they operate.
  • Financial compliance professionals and crypto ATMs/exchanges have limited knowledge of each other. Crypto operators aren’t incentivized to monitor and report AML and fraud policies, that’s the primary reason why the need for compliance is weak in the industry. 
  • Lack of FinCEN enforcement of crypto exchanges.

It’s not only in the U.S, but illegal crypto exchanges are operational throughout the globe.

Risks to Crypto Consumers

Consumers face the most risk when it comes to the crypto industry. Crypto is a volatile industry and it exists in a non-regulated 24-hour financial market and is uninsured by any authority. Trending schemes and scams in the crypto industry are:

  • Money laundering through crypto exchanges
  • Romance scams 
  • Fake investment scams
  • Crypto for human trafficking, organ trafficking, and adult services
  • Crypto for art and antiquities money laundering 
  • Fake crypto exchanges
  • Crypto pump and dump
  • Blackmailing scams
  • Ransomware

What to Do to Eliminate Risks?

To prevent money laundering using crypto exchanges and ATMs, as well as to assist law enforcement, there are multiple detections and compliance strategies that can be used to reduce the risk from the crypto industry.

The first step to reducing risk from the crypto industry is to thoroughly screen your customers, and authenticate whether they are who they claim to be. Regulatory bodies have to pay extra attention to sanction lists, PEP lists, and high-risk countries. Complete due diligence should also be done on all clients that are onboarded to the institution. Complete due diligence also includes:

  1. Conduction through KYC/KYC checks
  2. Collecting beneficial ownership information for businesses (including parent and intermediary companies)
  3. Conducting risk analysis on politically exposed people
  4. Monitoring transactional activities
  5. Adverse media screening

All these tactics from onboarding to investigations can significantly improve the potential risk in your organization allowing you to improve compliance and reduce fraud losses. One of the major issues with the crypto industry is the lack of education in the regulatory industry. To reduce the risk of fraud, educating the crypto exchanges and businesses is essential in eliminating the risk of fraud. Investing in technologies like online document verification software and online KYC verification software is vital to reduce the risk of fraud and screen customers thoroughly.

As of right now, crypto regulations are not perfect, but changes in future regulations will help in the betterment of the industry. There are currently crypto compliance working groups that are being formed to fight fraud in the crypto industry.

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Employment Verification: Step-by-Step Guide

employment verification

There are several instances where companies will be asked or will initiate a request to verify an individual’s work history and other details associated with their current or past employment. This process is known as “employment verification.”

The hiring process is when most companies do verification of employment, and the process includes professional reference checks. Businesses generally receive proof of employment verification requests from third parties. Lenders who receive loan applications, and credit card applications tend to do employee document verification to make sure that the person who’s applying isn’t lying about their employment status.

Mortgage lenders verify your bank statement and also verify your employment by contacting your employer directly and by reviewing the latest income documentation. The borrower has to sign a form authorizing an employer to share their income information with a lender asking about employment verification. At that point, the lender typically calls the employer to obtain the necessary information. There are some steps that you need to take, but there are steps borrowers need to take if they refuse to verify employment. 

Businesses can use multiple methods to verify employment, including getting a “proof of employment verification” letter, paystubs, contacting references, or executing contracts and agreements. In this article, we’ve mapped out the main reasons for employment verification, how companies fulfill the requests, and why employment verification is important.

What’s Verification of Employment?

To approve mortgages, banks need to verify employment. The same goes for businesses looking to hire new employees, or banks verifying employment before onboarding a customer.

The mortgage lender needs to check that you are employed where you say you’re employed. They also have to take your level of income into consideration. This confirms that the borrower can bear their down payments, EMIs, and closing costs. 

Employment Verification: When is it Required?

Now that online job hunting and professional networking sites like LinkedIn are becoming famous, a CV/Resume is more than enough to verify a person’s employment status. However, many potential verifiers can demand better and more formal certification of employment. This happens mostly when a financial transaction is involved. There are several employment verification documents needed to fulfill the request.

1. Lenders Approving a Loan

Lenders that are reviewing loan applications definitely need to verify an individual’s employment status. This helps them in making sure that the individual can make payments on time. Not just employment, employers can also verify the salary details of an employee if a lender requests so. However, companies should be careful to abide by the local laws. Some locations like the State of California and New York City prohibit employers from divulging salary information during the hiring process, but this doesn’t often affect loan requests. Employment verification methods can differ from business to business, but the end result is similar.

2. Property Owners Issuing a Lease

Similar to loan providers, the employment verification requirements of a property owner are to verify an individual’s employment status to make sure they can make payments under the lease. Financial history is also an important part of completing the process. This can be done by acquiring bank statements from the individual.

3. Employers Hiring New Employees

Before handing out an offer to a new employee, companies often check the employee’s employment history. This is done by contacting the references, which also require formal documentation. This step includes asking for employment verification documents. 

4. Work Visa Holders Verifying Employment

To secure a work visa in a country, applicants are required to have secured a job in the country. Similarly, this is necessary during application renewals, if the individual has quit the job or has been let go, the work visa will diminish. Visa holders must inform the office that issues the work permit if they’ve lost their jobs.

Process of Employment Verification

In general, lenders verbally verify the information borrowers share on the Uniform Residential Loan Application. However, they can also choose to get the data via fax, email, or a combination of any number of methods. Lenders use this information to calculate several metrics to determine how likely a borrower is to repay a loan. A change in employment status can have a huge impact on your borrower’s application. 

1. Additional Information

Whenever a lender verifies employment, a lender will frequently ask other questions as well. The basic question a lender may inquire about is the type of employment. Lenders are also interested in verifying the position, salary, and work history. Most lenders only verify the borrower’s current employment, some lenders may also want to confirm previous employment information. This practice is more common for borrowers who have been in their current organization in less than two years. 

2. Verification for Self-Employed Individuals

Those who are self-employed and take on the mortgage have a different type of employment verification. In this situation, lenders need an Internal Revenue Service (IRS) Form 4506-T. This form is a request for a “Transcript of Tax Return” which allows the lenders to receive a copy of the borrower’s tax return directly from the IRS. In a self-employed situation, the lender may also have to ask for attestation by a Certified Public Accountant (CPA) to confirm income.

Common Employment Verification Methods

Companies should notify an existing or a past employee that they’ve received an employment verification request. This allows companies to make sure that the request is legitimate before providing sensitive details to an unknown party. This is also the first step to learn if you’re wondering how to do employment verification. 

1. PoE Letter

A PoE (Proof of Employment) letter is issued by an employer and it acts as a formal confirmation of a current or past employee’s status. PoE letters often include:

  • Employer’s business name and address 
  • The employee’s job title
  • Dates of the current/past employee’s employment
  • List of employee’s responsibilities
  • The employer’s contact information

2. Paystubs

Pay Stubs are often used for employment verification. It provides a record of an employee’s past income from the company. This information is needed when the individual is applying for a loan, mortgage, or credit card. In some locales, providing a customer’s salary information is against the rules and regulations. 

3. References

Another method of verifying employment is by contacting the references provided by the individual. A reference can help in providing information about the employee’s roles and responsibilities throughout the organization. The reference (usually a manager) can verify if the individual ever used to work with the organization. 

4. Contracts & Agreements

These documents help in proving an employee’s relationship with a company, but most of the contracts and agreements only show that the employee accepted a job offer. One issue with this method is the lack of surety of the individual working with the organization. 

5. Third-Party Services

Businesses that need employment verification in bulk tend to use third-party services to reduce stress from internal resources. These third-party service providers complete the employment verification process on a company’s behalf.

What Information is Legal to Share?

Employment verification is a tricky process as the entity may require details that an employer is prohibited from submitting. As a matter of fact, employers can face huge penalties if they fail to abide by the rules. Health and Salary information is the most sensitive employee information that most businesses aren’t allowed to share. Here’s a deeper insight into what information is legal to share.

1. Health Data

Sharing information about an employee’s health isn’t legal in most areas. There is no way to know what a verifier wants to do with the information. Health and physical appearance-based discrimination in hiring is a common practice.

Sharing information about an employee’s disability is a highly frowned upon practice. According to the Americans with Disabilities Act of 1990, sharing information about an individual’s disability is considered illegal. 

Hiring employers can confirm whether the person they’re hiring will be able to fulfill the responsibilities of the position they’re being considered for. 

2. Salary and Earning History

Certain situations such as loan approval require entities to gain insights into the applicant’s earnings. Several locations such as the State of California and NYC prohibit companies from requesting previous salary information during the hiring process. This rule is set in place to protect an employee from having the salary for a new role compared to the previous compensation.

How to Respond to Refusal to Verify Employment?

Some employers completely deny a borrower’s request for employment verification, but it can be easy to fix this situation in some cases. You need to clearly explain to the human resource manager why you need to verify the employment of the borrower. Some companies will not provide any information without the verbal or written consent of the employee. There can also be state laws that a company has to follow before handing out an employee’s information.

As an employee, you should talk to your employer about this. You can also tell your potential mortgage lender about your organization’s rules and regulations. Some lenders may be willing to process an application without employment verification as another state’s law prevents them from verifying a certain type of information. 

There are also some cases where an employer will not verify employment for other reasons. If this clashes with your mortgage application process, then you should start searching for a different job.

Conclusion: Employment Verification

A lot of businesses suffer from employee scams and that’s why it’s essential to verify employee information. In high-risk industries such as the financial industry, employment verification is a need rather than a formality. DIRO online document verification can reduce the verification time by 90% while simultaneously providing court-admissible proof of verification.

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ID Verification and Optical Character Recognition

Optical Character Recognition

There’s a major change going on in the industry, DIY online identification, and efforts by companies to combine OCR technology, facial recognition software, and low-cost manual review teams. On its face, using DIY online identity verification makes sense, but it’s vital to understand the major limitations of ID verification solutions. Optical character recognition is a commonly used method for online identity verification. OCR extracts important data from ID documents such as driver’s license or passport. This will generally include a person’s name, address, date of birth, and ID number. The data extraction process is incredibly fast and removes the need for manual data input.

OCR is a great method to verify customer ID but it does have its fair share of challenges. OCR technology was first intended for reading black text against a white background using a flatbread scanner, not for extracting key data fields from ID documents using small fonts and different colored backgrounds that may include holograms, watermarks, and printing on glossy surfaces.

Common Limitations of OCR

1. Structuring Data Involves More than Just OCR

Whenever users take a picture of their ID document with their smartphone or webcam, several steps are required to extract the information. The first is to recognize the type of ID document that the user is submitting. This allows the technology to properly structure the information to read the OCR, which requires figuring out the first name, last name, DOB, and other important data. Straight OCR without AI or any technology built to specifically recognize ID types will lack the required accuracy you need to fight fraud and deliver a good user experience. 

2. OCR Have to be Combined with Image Rectification

When a user clicks a photo of their ID documents, the image needs to be de-skewed if the image wasn’t aligned properly and reoriented for the OCR technology to properly authenticate the ID data for online ID data. 

3. Colored Background ID Documents Can Be Challenging for OCR

OCR usually takes color/grayscale photos and converts them to plain black and white to reduce blurred texts and better separate black and white texts from their background. 

4. Glare & Blur Leads to Mistake

It’s extremely common for customers to click photos of ID documents with glare and blur. Whenever there’s a glare or blurriness in the ID image, the probability of data extraction and authentication mistakes becomes significantly higher. 

5. Webcams are a Challenge for Traditional OCR 

OCR poses another challenge for businesses operating in the financial industry and trying to offer an Omnichannel experience by allowing customers to click the photo of ID documents using a couple of technologies. While most smartphone cameras right now offer high picture quality, the same can’t be said for webcams built into laptops and tablets. If a business allows customers to click photos for customer onboarding using webcams, then it can impact the picture quality of the document. This can increase the risk of mistakes caused by OCR technologies.

6. OCR May be Challenged by Some ID Subtypes

Optical Character Recognition (OCR) is based on extensive learning of the patterns that characterize a specific ID type, and this can make it challenging for solutions based on numerous ID subtypes. OCR is only usable if the ID data is collected and authenticated correctly as it requires the software to understand all nuances and minor features of different ID types around the globe.

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Why AI-Based Online Document Verification is the Best Way to Verify Identity and Mitigate Fraud?

ai-based document verification

Showing any kind of proof of identity is vital to complete any kind of legal formality or verification process. No matter what industry a customer is trying to become a part of, be it banking, insurance, healthcare, technology, travel, education, or any other online service, the customer is asked and obligated to present an Identity proof to verify a customer is who they say they are. Verifying customer identities can reduce the risk of identity theft.

Verifying identities may sound great, but as a business, you’ll have to spend money, time, and HR to put secure document verification solutions in place. Extra tough verification process reduces the overall customer experience. While most customers don’t like the extra tough verification process, not having a verification process reduces the trust in the brand and can cause businesses to lose more customers during the onboarding process. 

To find the balance between these situations, AI-based digital document verification solutions are viable, effective, and hassle-proof. Here’s why digital identity verification solutions are important and how it helps financial institutions prevent risks?

What’s the Need for Verifying Customer Documents?

Before we go deeper into how digital identity verification works, it’s important to understand why businesses need to verify documents at all be it using technology or human methods. Online document verification serves two key purposes, it prevents risks like financial fraud and identity theft, secondly, online document verification helps in industry-wide legal compliance. 

According to studies, the total loss incurred due to identity fraud in 2020 was about $16.9 billion. The damages that result from theft of identities don’t just revolve around money, it also involves sexual, racial, and gender-related comments on social media which can cause a lot of issues. 

The covid-19 global pandemic has increased the overall online transactions and digital banking, it also improves the number of digital fraud and identity theft cases which will eventually cause more damage than benefit. To reduce this type of fraud, banks and financial institutions are spending a lot of money on AI-based identity verification technologies.

Difference Between Modern and Traditional Document Verification

Traditional methods of document verification were hectic, and inefficient and it makes a lot of challenges for customers. Before the digital revolution in the banking sector, customers used to visit the brick and mortar branches to get the documents verified for account opening and loan applications. Traditional document verification used to take weeks at the same time. Plus, the results used to be extremely inefficient. Fraudsters make counterfeit documents that are indistinguishable from real documents.

However, conventional ways of authenticating ID documents fail to deliver results that are 100% efficient. There is always a probability of having mistakes in their results. That is why conventional document verification isn’t the best idea while fighting fraud. 

To combat the problems in the manual document verification process, online document verification needs to be used by banks all over the globe. Online document verification technologies that rely on Machine Learning and Artificial Intelligence algorithms can be helpful in combating document fraud. Online document verification technologies improve the odds of verifying customer documents and minimizing the approval of fake documents. And, online document verification can boost the customer experience. 

Regulations and Compliances Necessary to Fight ID Fraud

Businesses and industries can’t work without document verification because it is required by law to follow all the compliances. Countries all over the globe have to follow legal compliances such as KYC (Know Your Customer) and Anti Money Laundering (AML) guidelines that are required by law to be followed by businesses. According to the rules set up by the Federal Trade Commission (FTC), verification of documents can be useful to potential identity theft. Complying with KYC and AML guidelines is not just a legal requirement, it is also an effective and appropriate measure that will help businesses fight all kinds of identity frauds.

Types of Document Fraud

There are several types of document fraud that banks and financial institutions have to face. To perform document fraud, fraudsters use counterfeit documents and they also steal documents. Customers demand instant verification and with so many types of document fraud, it’s challenging to verify documents. Here are all types of document fraud:

  1. Modified Documents

Modified documents are original documents that have been altered, and these documents often come in two different types:

  • Forged Documents: Fraudsters change vital information on documents to conduct ID fraud. They often end up changing variable information, adding real pages from other documents, removing specific pages, applying fake stamps or watermarks. 
  • Blank Stolen Documents: All documents start out as blank pages, when fraudsters get access to these documents they can use them to trick banks. 
  1. Illegal Documents

Forged documents are original documents once, but illegal documents are fake altogether. Illegal documents are of different types:

  • Counterfeit Documents: As the name suggests, counterfeit documents are reproductions of originals. Usually, a fraudster will get their hand on an official blank document and they use the blank document to add in information.
  • Camouflage Documents: There are some things that you shouldn’t have on a document. A camouflage or fantasy document often contains information that shouldn’t be there. This is the easiest type of fraud to detect.

How Does Digital Certificate Authentication Work?

The online document verification process verifies the documents using tools and software all using Artificial intelligence. Just as a human officer examines an ID card/ Identity document confirms customers by matching their face against the document provided. AI-powered document verification tools also verify the identities using a different set of documents. 

So how does the online document verification software work? The process is quite simple and usually involves several simple steps:

  • The digital document verification software is usually integrated with your business’s website and other automation systems. 
  • When a customer logs onto your website for the first time, he or she will be asked to upload a government-issued identity proof in an image format. Most software often provides a live image capture feature for comparison.
  • Once the customer has uploaded the images, the software scans the documents using optical character recognition.
  • The extracted information from the image is then analyzed and verified against the government and private databases. Simultaneously, the document is also checked for forgery and signs of tampering. Usually, the verification of documents takes a few seconds. 
  • If the documents uploaded by the customer are genuine and not tampered with, then the user can sign up with your business. Documents that aren’t authentic are rejected and the customer can’t use the services. 

All the AI-powered document verification services verify documents issued by the government only. These documents include passports, driving licenses, photo ID cards, and voter’s identification documents.

What are the Fraud Detection Techniques Used by Software?

Most of the major document verification solutions use three types of analytics to determine if a document is real or not. These analytics are data integrity, visual authenticity, and facial biometrics data. 

  1. Integrity of Data: As you may already know, documents issued by the government come with a set of features. Features such as integrated algorithms, data fields available in multiple locations. AI-powered document verification tools check all data features to make sure that they match.
  2. Document Authentication: The software also checks for any kind of anomalies or signs of tampering in the document. These signs of forged documents include pixel quality, holograms, and incorrect logos, barcodes, and micro prints. 
  3. Facial Biometrics: It isn’t enough to verify just the data available on the document and checking the authentication of the document, software also needs to make sure that the person who has uploaded the document is the actual owner.

All these technologies make the solutions more efficient and accurate in verifying the documents in comparison to manual verification. 

Benefits of Using an AI-Based Document Verification

During customer onboarding, consumers are asked to submit a series of ID documents such as government-issued ID cards, driving licenses, passports. It’s not easy to verify documents manually. That’s why online document verification allows clients to submit a selfie and upload online documents for verification. 

After submitting documents, online document verification software verifies documents online and verifies if the document is authentic or not. DIRO online document verification software fetches document data from the issuing source to verify if the document is legitimate or not. 

Online document verification offers a wide range of advantages including faster turn-around time. It can manage to verify several documents easily from all over the globe, each document with different fraud detection rules and elements. 

Moreover, when businesses use AI-powered document verifications solutions, errors reduce by a drastic number. AI-based solutions are known for detecting frauds and red-flag patterns that humans usually miss out on.

Final Take: Importance of AI-Based Document Verification Solutions

Digital transformation of businesses has been going on for a long time, the global pandemic has pushed the digital transformation into overdrive. To reduce the threats of identity theft and financial fraud, businesses often comply with regulations that end up with complex processes that often push customers away.

As we’ve mentioned above, verifying documents offline can be tough, ineffective and they aren’t sustainable. Moreover, they’re expensive and take up a lot of time. To solve the issues banks face with offline document verification, banks rely on online document verification software. 

AI algorithms and machine learning solutions can help banks, credit unions, financial institutions to identify suspicious money laundering activities. Thus online document verification can be crucial in mitigating fraud, and using AI-based online document verification it is possible to reduce the flow of fraud. 

It is imperative to verify documents without having to reduce customer satisfaction. To successfully do that, AI-Based digital document verification solutions are the best choice. To protect your business against identity fraud eliminates the need for maintaining huge teams. AI-Based digital document verification solutions are the future.

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Electronic Signatures and Digital Signatures: All You Need to Know

Electronic Signatures vs Digital Signature

Individuals and businesses use the terms electronic signature and digital signature interchangeably, and there are some key differences and specific reasons for why you may have to choose one over another. In this guide, we aim to clarify the difference between electronic and digital signatures. You’ll also learn which type of signature should determine the document signing workflow.

What Is an Electronic Signature?

According to the US Federal ESIGN Act, electronic signatures are:

“Electronic sound, symbol or process, attached to or logically associated with a contact or other record and executed or adopted by a person with the intent to sign the record.”

To put it in simple words, e-signatures are used to refer to any signature that is added electronically as opposed to a physical paper document. Electronic signatures are most commonly used to verify the content of a document, however not all electronic signatures offer assurance to law and order. If your business operates in an industry that’s highly regulated while dealing with personal or customer information, then using a more secure option is the key. 

What is a Digital Signature?

Digital signatures are a type of electronic signature and both of them are used to sign a document. There are some key factors that make both of them unique from each other. 

Paper-based documents and workflows are full of security concerns. The most common concerns customers and businesses face while dealing with paper-based documents are:

  • Is the person who provided the document real? How can businesses verify if the signature is valid and hasn’t been forged?
  • How can businesses safeguard that the content within the document hasn’t been tampered with?

Notaries came into existence to help businesses to support those concerns. Notaries of today play a vital role in ensuring that the parties of a transaction that the document is authentic and can be trusted. 

However, the same problem exists in electronic document workflows. Digital signatures were developed to help to solve this problem. They are essentially the digital equivalent of adding a notarized signature to your paperwork. In the case of digital signatures, a third party known as the Certificate Authority (CA) is responsible for verifying customer identity.

Certificate Authorities tie your identity to a PKI-Based digital certificate that allows the users to use their certificate to create digital signatures locally using a token or remote using any of the cloud-based signing platforms. 

When you add a digital signature to a document, cryptography ties your digital certificate with the data being signed into a unique digital fingerprint. This is what makes the digital signature secure and compliant, thus making it more secure and powerful for law enforcement agencies. To summarize, a carefully thought-out and secure cryptographic operation allows digital signatures to assure:

  • The document is authentic and comes from a verified source
  • Identities have been verified by a certified authority
  • The document is authentic and hasn’t been tampered with

What Types of Signatures are Legally Binding?

The majority of the regulatory bodies now demand digital signatures over electronic signatures because digital signature provides authenticity and integrity. Deciding what type of signature you want to implement should be dictated by the type of documents you need to sign. These are the type of digital signatures that are binding:

  • US ESIGN
  • FDA CFR 21 Part 11
  • US UETA
  • US State Professional Engineering Seals
  • UN Model Electronic Signature Law
  • Sarbanes-Oxley (SOX)
  • eIDAS 
  • CNCA

Which Document Signing Platforms Support Digital Signatures?

Fortunately, most of the document signing and workflow platforms enable users to apply secure digital signatures. Here is a list of platforms that support digital signatures:

  • DocuSign: Supports digital signatures and electronic seals by integration with GlobalSign
  • Adobe Sign: Two types of digital signatures, certified and approved.
  • Microsoft Word: Microsoft also supports two types of digital signatures using a token certificate visible and non-visible.