Month: August 2022

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New Account Verification Rules – What They Hold for Consumers and Financial Institutions

new bank account verification rules

The payments industry is changing faster than ever. Consumers are welcoming a number of changes and adopting the latest technologies. Customers globally are moving towards an online payments landscape instead of relying on cash and checks. There are over 140 online payment methods available globally. The use of online payments is also giving a boost to the already growing eCommerce industry. 

While cash is still the primary method of transaction, soon there will be a drop in global cash usage. This can be credited to instant bank transfers and mobile wallet payments. Some of the market-leading mobile wallet apps are:

  • Google Pay
  • Apple Pay
  • Samsung Pay

Several other contactless payment methods are slowly changing the payments industry. So, it makes sense that the customer bank account verification methods need to change too.

Fraudsters Look for Weak Points

With the rise of digital payments, digital fraud is rising too. The Automated Clearing House is one of the most common targets for fraudsters all over the world. Fraud in the ACH channel is happening throughout global payments. Plus, there is a 40% increase in customers experiencing fraud events at some point in their lives.

ACH transactions are used widely throughout the USA because they are simple to use and affordable. Transaction fees on the ACH channels are lower than card fees and wire transfers. This is why the ACH channel is used all over the USA. This reliance is also attracting fraudsters of all kinds. 

The ACH payment process isn’t compromised. The fraudsters attack the processes that happen before the transaction. Most fraudsters try to get the payments into their accounts instead of the actual account.

These frauds happen with the help of fishing fraud, social engineering attacks, data breaches, and others. These attacks help fraudsters gain the information they need to steal customer identity data. Then, fraudsters can use this information for creating synthetic identities or to do account takeovers.

To protect customers, vendors, and institutions, better methods of account verification need to be employed.

New Account Verification Rules

NACHA, the ACH operating entity, is trying to bring about some changes in the industry. They’ve adopted a new rule that requires financial institutions to go beyond the old standard for providing security to online transactions. To combat account fraud, account validation is becoming a part of the process.

NACHA also stated that they understand the implementation of these rules will have impacts on booth payment originating institutions, and payment receiving institutions. This includes the increased cost as new tools will be needed to be implemented. If banks and financial institutions don’t have the right setup for account verification, they will need to rely on third-party verification software.

These compliance changes offer an opportunity to protect the payments and reduce the risk of fraud. It can also help in reducing non-sufficient fund payments, and user errors. If these new rules are implemented perfectly it can improve the user experience and also improve the brand reputation.

The best bank account verification software offers these results simply and seamlessly. Plus, it can stand tall in the customer’s expectations when doing online transactions. If the process is slow or frustrating, consumers often tend to switch over to some other service provider.

Financial institutions should always focus on improving customer experience while reducing the risk of fraud. It’s a tough path to walk on, but that’s what is expected. If a financial institution can provide a good onboarding experience, it can build a customer reputation.

Making sure that the customer keeps using the account after its opening requires account validation tools that verify data almost instantly. This allows customers to send and receive money with ease.

Bank Account Verification Solution by DIRO

Banks and financial institutions that don’t have any solutions of their own need to rely on third-party services. DIRO online bank account verification solution is the answer. It enables financial institutions to smoothen the customer onboarding process with instant bank account verification.

As the data is cross-verified directly from the issuing source, it also eliminates the use of fake and stolen customer data. Moreover, instant bank verification doesn’t hamper the customer experience, leading to better business-customer relationships.

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Open Banking Initiatives Around the World

open banking efforts

Open banking has become the “IT” word of the financial industry. But, it is not just for creating hype, open banking has some incredible real-world applications. 

In case you’re not familiar with open banking, it’s the process of banks and other institutions allowing customers to share their financial data with trusted entities. Open banking/open finance makes bank-to-bank payments easier and allows customers to access all their data in a single place. Everyone here at DIRO and other financial institutions considers open banking to be the future of the financial industry. 

If you don’t have the right knowledge, it may be hard to understand the benefits open banking brings to the table. There are multiple levels of open banking that offer different features.

In this guide, we’ll go over different open banking models, and how countries all over the world are utilizing them to their benefit.

Brief History of Open Banking Around the Globe

The term “Open Banking” first came onto the scene in July 2013, with the launch of the EU’s PSD2 proposal. In which it was recommended that banks allow trusted third-party sources to access customer financial data. These early suggestions went on to become the Open Banking landscape of today. 

Jump to 2022, and Open banking has become a global phenomenon. At least 87% of countries have some type of open banking API. In the European Union, there are over 400 third-party service providers. They are authorized to access financial data using open banking.

State of Open Banking Framework Around the World

Each country has its own way of leveraging an open banking framework. Here’s a peek into the current open banking landscape across the world:

1. State of Open Banking in the UK

Open Banking regulations in the UK require the top 8 banks to create APIs that third-party service providers can use. These APIs have to establish a secure way of data sharing.

The deadline to create these APIs was all the way back in January 2018. While the regulation only asked the 9 banks to create these APIs, other institutions automatically followed suit.

In the UK, third-party service providers can use the Open banking API in two ways.

The TPPs can be Account Information Service Providers, which allows them to get access to payer information and data including balance information and verification. 

Or, the TPPs can be Payment Initiation Service Providers, which allows them to make instant bank-to-bank payments, without needing a card, manual transfer, or direct debit transaction.

The UK is definitely leading the charts when it comes to open banking frameworks, innovation, and customer inclusion. Based on a Report in December 2020, there are over 294 regulated providers of Open Banking in the UK.

Unfortunately, even with this strong open banking product usage in the UK, only 102 out of 294 entities have a live customer offering. Although, the reports suggest an upward trajectory in upcoming years.

While there’s a positive outlook on open banking, a lot of customers are still suspicious and reluctant to use their service. Less than 25% of all UK consumers are happy sharing their financial data with third-party providers.

2. State of Open Banking in the EU

There will be some key differences in all the individual countries across the EU, but the group as an entity is going strong. They’re working strongly towards building a complete open banking structure.

Even though the European Commission made recommendations all the way back in 2013, the deadline for PSD2 readiness was in 2018. Relevant APIs from Europe is about 1 year behind the UK. With this slow API implementation, Europe can be seen as lagging behind on the global stage.

European open banking APIs are lagging behind the UK ones, but we can expect to see a sudden growth in the TPPs using the APIs. 58% of all European FinTech decision makers consider open banking as a great opportunity.

3. State of Open Banking in the US

Unlike the UK and Europe, the USA has taken an industry-based approach to open banking. Industries themselves are building APIs and infrastructure without any oversight from regulatory bodies. 

The current US Open Banking framework has been limited to account information solutions, most of which are done using screen scraping. But Screen Scraping isn’t an effective solution as it has led to some major data leaks. 

The US is definitely behind the UK and Europe in the race for open banking, and the demand for new technologies is growing at an incredible rate. Especially after the Covid-19 pandemic. As the rest of the world is starting to put efforts to build a proper open banking framework, global companies headquartered in the US will start to take advantage of international efforts.

Other Innovators in Open Banking Landscape

There are some other countries that are making great strides when it comes to open banking. Here’s a peek into their efforts:

1. New Zealand

New Zealand’s approach to open banking has been pretty hands-off. There have been some discussions of Consumer Data Rights, but there’s nothing solid. 

2. Canada

Similar to the US, Canada has also taken an industry-led approach. However, there are some government bodies looking at how to create more regulatory oversight moving forward. According to a 2019 report, the implementation of a structured framework would address consumer privacy concerns. 

3. India

The open banking framework has been well established in India since 2016. This implementation was spearheaded by the Unified Payments Interface (UPI). UPI allows consumers to access their bank accounts, and make instant payments to other banks. India is moving forward with a hybrid approach to open banking.

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KYC Requirements in Singapore in 2022

kyc regulations in singapore

Singapore is one of the world’s leading financial hubs and also one of the Asia-Pacific leaders. So, it makes sense that businesses all over the globe want to invest in the Singapore markets. Economic stability makes it an even better option for investors globally. Singapore for years has been following a pro-business attitude that encourages global trade.

Anyone wishing to do business or onboard Singapore customers must follow the clear and robust KYC and AML guidelines. These KYC guidelines Singapore are set by regulatory bodies in Singapore to prevent ID theft fraud and the rise of money laundering.

KYC Regulations Singapore as Set by MAS

The KYC guidelines Singapore are built and implemented by the “Monetary Authority of Singapore (MAS).” And the Singapore KYC requirements specify that digital verification is acceptable, but businesses have to take appropriate measures, these include:

No verification is needed until a customer moves forward with the account opening process. This is only applicable if there are internal policies that limit access to financial services before customer verification is complete.

Singapore Digital Identity System

Singapore has one of the best digital identity systems. The Singapore digital identity system completely relies on mobile apps and biometric data to make the onboarding process faster.

Citizens of Singapore can use the Singpass app to sign up for a government and private sector services. Singpass is connected to Myinfo (a service that provides verified personal and corporate data) which leads to the remote signing of the documents. 

There’s also a step beyond customer identification, that is the general KYC rules such as due diligence and customer monitoring.

If a customer is on the PEP list or poses a greater risk for money laundering, then an enhanced due diligence level is required. Even greater levels of due diligence are needed if:

  • Transaction activities change
  • The institution changes document standards
  • Lack of appropriate identification information
  • There’s a physical change in relations with the customer

Beneficial Ownership Verification in Singapore

The steps to verifying businesses and beneficial owners lie outside the basic KYC and CDD norms in Singapore. Any director, partner, or entity that has executive-level control over the organization’s operations is considered a beneficial owner. Identities of these beneficial owners have to be identified by businesses.

The Digital identity system in Singapore can also help in hastening this process. Myinfo Business app can automatically provide verified business information and beneficial ownership information data. The app can do this by fetching data from government sources.

An additional level of due diligence is required only if there are any changes in the ownership.

Payment Services Act in Singapore

The Payment Services Act in Singapore undertakes the Licensing and regulation for all the payment service providers. Organizations that have to follow these rules include:

  • Domestic money transfer services
  • International money transfer services
  • Account creation services
  • Merchant acquisition services
  • E-money issuance services
  • Digital payment token services

The biggest impact of these regulations is on entities operating the crypto and the NFT industry. Any entity that works in buying and selling digital assets, offers token exchange, or promotes these services may fall under the payment services act in Singapore.

Payment providers have to be ready to fight money laundering in advance. They should build money laundering prevention systems to combat fraud. Also, all the customers need to go through identity verification.

Low-risk customers need to go through simple due diligence, but customers with high risk have to go through enhanced due diligence. Other methods of risk prevention include Watchlist screening, transaction monitoring, and recording and reporting of transactions that seem suspicious. 

There’s one more regulation that payment companies operating in Singapore have to follow. The regulation is known as Financial Services and Markets Bill also called FSM Bill.  

The goal of the FSM bill is to minimize the risks by licensing the payment service providers and imposing AML/CFT requirements.

State of FinTech Industry in Singapore

Even though the population of Singapore is just 5.9 million, it has 132 banks. Plus, there’s a boom in the FinTech industry in Singapore. In 2021, the investments in the FinTech market rose by 37%. Moreover, the total amount invested in 2021 left China and India behind. 

Singapore is a great platform for companies that want to gain a firm footing. Plus, it can be the perfect place to expand service globally. Singapore is working towards Crypto adoption, which will only boost the financial situation of the country. Currently, the financial environment is highly secure because of the KYC requirements in Singapore.

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DIRO for a Faster Customer Onboarding Process

how to secure customer onboarding process

How you handle customer onboarding sets the tone for your partnership with the customer. Potential customers will drop the process if you have a clunky and slow onboarding process. This is why it is important for businesses to carefully build a robust customer onboarding process. It does more than offer a good customer experience, it helps in boosting revenue, security, and more.

Customers are a crucial part of any business, so it makes sense that their onboarding process should be as smooth as possible. If your customer doesn’t like the way you’re handling the onboarding process, they’ll soon lose interest in your product/service.

DIRO is an emerging business that aims to improve every single part of the customer onboarding process. With a range of use cases and services, DIRO can add speed, security, and efficiency to the customer onboarding process.

Why is the Customer Onboarding Process Important?

Before you understand how DIRO can streamline your customer onboarding process, you need to understand why the process is crucial.

Any business needs a steady number of customers coming in each month to survive. If they have a poor customer onboarding process, they’ll lose more than half of their potential customers.

Consumers of today want seamless experiences and fast results. If a customer has to wait for minutes just for a contact form to open up, they’ll abandon the process altogether.

So, to generate revenue, and boost the brand reputation, businesses need to build every part of the onboarding process carefully.

Build a Customer Onboarding Plan

It becomes easy to build an onboarding process when you know what the end goal is. While keeping this goal in mind, start developing a process in your mind. All your efforts should be dedicated to fulfilling that goal. 

In most cases, the goal is to onboard a new customer and get them to use your service. Businesses can build an effective customer onboarding process by breaking the process into smaller processes:

1. Choose a Demographic

This is a step that a lot of businesses skip, or overlook. Understanding this part is crucial for developing a customer onboarding plan. The truth is that not everyone wants your service, so there’s no point in casting a wide net.

You want customers who need your service. So, choose a demographic or a series of demographics where you want to promote your services. A demographic also means targeting the right age group.

2. Understand the Market

If you don’t have an understanding of your market, your business will never succeed. Understand the ups and downs of the market and then build customer onboarding strategies. Not every market is suitable for your product, and you should know it.

3. Give Value Proposition

Once your product/service is out in the market. You need to start sharing the value that the product is offering. You’ve already completed the toughest task if you can tell your customers why they should jump onto your product/service.

4. Communicate Well

After you’ve finally onboarded a customer, you need to keep in touch with them. Staying in touch with customers serves two purposes, the first one is providing feedback regarding the product, and the second one is providing ideal customer service.

5. Stay Relevant

The world of technologies is ever-changing, there are always some changes. So, as a business, you should always try to keep up with new technologies. Especially the ones that can enhance the customer experience. Staying relevant is a great way to onboard new customers and retain old ones.

How DIRO Makes Customer Onboarding Easier?

Although customer onboarding remains an ever-prevalent challenge for most businesses, it can be streamlined a little with the right technologies.

Currently, the biggest challenge companies face while onboarding customers is verifying documents. There are not too many ways to verify if documents presented by customers are legit or not. This becomes a major concern for businesses under the financial industry umbrella. 

So, DIRO helps businesses of all kinds in verifying online customer documents with global coverage. Verify bank accounts, proof of address documents, utility bills, KYC, and KYB documents, and others to streamline the onboarding process.

DIRO can verify over 9,000 document types instantly by verifying documents directly from the issuing source. DIRO can boost the overall customer experience by reducing the time taken in document verification during onboarding.

You can contact us today if you’re interested in learning how DIRO can help you make the customer onboarding process faster. Moreover, DIRO online document verification can reduce the risk of onboarding fraudsters. As DIRO eliminates the use of fake and stolen customer documents by 100%.

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4 Best Ways to Protect Your Vendors’ from Being Attacked by a Cybercriminal

protect vendor from being attacked

In the public landscape, vendor bank account fraud is growing at an alarming rate. A vendor contacts the accounts team to tell them they haven’t received the payment. The accounts team then checks the data and finds out that they’ve paid the invoices. So, when more due diligence is done, it is found out that the money wasn’t sent to the Vendor’s account but to some other account altogether. What happened was that a fraudster got into the systems and changed the Vendor’s bank account information.

This situation has happened a lot in recent times. Most recently it happened with Scott County Schools where they lost $3.7M. Eventually, they were able to recover the funds. And they decided to put some safeguards to prevent something like this from happening again.

Another similar situation happened in the “City of El Paso, TX” where they uncovered $2.9M, and $300K payments were sent to a fraudster. Unfortunately, they were only able to recover $1.6M and $292K from the payments. To prevent this from happening again, they decided to verify vendor information before every single payment.

Regardless of the fact your company has been in a similar situation or not, there are 4 basic steps you can follow to prevent fraudsters from changing banking information.

Prevent Vendor Bank Account Fraud

1. Build Custom Vendor Banking Forms

The first and foremost thing you should do is to build a banking form for all the vendors. The reason for doing so are:

  • Don’t accept banking information in an email body. An email with banking details doesn’t provide authentication so that’s why you build the form.
  • Change the form every year. This way your team can distinguish between fake and real forms. If they receive an old form, they can ask the vendor if there’s a mistake.
  • Add vendor authentication on the form. Existing vendors will have to add some kind of information that’s unique to them. No one except the vendor should have that information as it helps in reducing the risk of fraud
  • Your form should require a digital signature. Be careful while building a PDF form with a digital signature built into the form. To avoid emails and calls from vendors saying they’re facing errors, let the vendors use their own digital signature tool.

2. Verify Bank Information

This is a vital step in preventing vendor bank account fraud. As you confirm a vendor’s Legal Name and Tax ID to match IRS records, you should also confirm the bank account information to match them against your records. Moreover, you can use DIRO’s bank account verification service to make sure the documents provided by your vendor are true.

3. Contact Vendor to Confirm Information Change

Once you’ve received the updated form, and confirmed all the data against your records, it’s time to contact the vendor. Call the vendor to verify the changes if there are any. This may seem cumbersome to both parties at first, but the benefits outweigh the pain. There won’t be any payment delays, and you won’t have to try to recover lost money.

While verifying the information, keep in mind that the vendors may not respond right away, so you need to find a way to keep track. If the Vendors don’t respond in time, don’t process the payment.

4. Send Notification to Vendor After Information Change

If there are any changes in the vendor banking information, you should build a system that sends an automatic notification system. Whenever the information is changed, the vendor will receive a notification.

How to Make This Process Efficient?

Building and setting up this process takes up a lot of time. But the process is crucial as it helps vendors and yourself be safe from fraudsters. Implement a vendor self-registration portal for vendors to authenticate themselves and prevent fraud. On the portal, vendors can authenticate themselves and also update their banking information as per their preference.

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Money Laundering and Wash Trading in NFT – Taking a Deeper Look

wash trading

Wash trading is becoming common practice for a number of reasons. The trader or company may be trying to promote buying to raise prices, or to get people to sell at lower prices. The real reason is that the trader wants a tax refund whenever they engage in wash trading. This helps them in collecting capital so they can perform the same activities over and over again.

Understanding Crypto Wash Trading

In layman’s terms, Wash trading is done to trick and mislead traders, investors, and collectors about the true value and liquidity of a coin or NFT. Any trader or investor that does wash trading buys and sells the same asset over and over again.

Wash trading is impacting the market in the favor of the NFT owner/developer as it changes the actual value of the account. Wash trading requires the trader to quickly purchase and sell an asset in a short time period. Usually, one or more collaborating agents make multiple deals without any account of market risk. This makes the initial position of hostile agents the same as before.

On the Ethereum Blockchain, “Cryptopunks, a Larva Labs NFT Project”, went through a wash sale in October 2021. CryptoPunk 9998, crypto was sold for 123,457 ETH.

This was not just a flash loan, but it was an example of NFT money laundering.

How Does Wash Trade Work?

The Constant buying and selling of a crypto coin or NFT are known as wash trading. The concept of Wash Traders goes one step beyond, and it also considers the investor’s goal and outcome of the transaction into consideration.

Investors or traders that buy and sell assets with a common benefit in a short time period are engaging in wash trading. Traders across accounts with the same Beneficial Owner are a concern for financial regulators as they may be involved in money laundering. 

To trick regulatory bodies and manipulate the market, some wash traders don’t include any actual transactions. Wash trading can also happen when traders pretend to buy the assets without any money being exchanged.

Why Is Wash Trading Forbidden?

In traditional financing, wash trading is considered illegal and forbidden. When it comes to the decentralized NFTs, whether Wash trading is illegal or not is not defined yet. 

Even though there are no rules and regulations in the world of NFTs, several governments have established oppressing rules. For example, a South Korean crypto exchange “Bithumb” was charged by the government for promoting the wash trade. This trade was worth more than $250 million back in 2018. 

While crypto wash trading isn’t considered illegal in some countries, it is a challenge to figure out the offenders. This is due to the decentralized nature of the crypto and the NFT industry. Due to the anonymous nature of coins and NFTs, they can be purchased and sold repeatedly. This increases the risk of wash trading and money laundering. 

The risk is increased with fake prices and fake volume data. There’s no way for legit traders to uncover valid data until regulatory bodies in which countries or regions overseeing particular assets get involved. This is completely different from traditional financial trading assets such as equities, which are backed by customer verification protocols.

Role of NFTs in the Money Laundering Process

Money laundering is a huge concern when it comes to art trading. As NFTs are anonymous, many people question if NFTs can be used for money laundering. So, the question arises, can NFTs be used for money laundering?

The answer is Yes. Developers and scammers are using NFTs to launder money. As NFTs have an advantage over traditional banking methods, there is a lot of use of crypto assets for money laundering. 

As it’s difficult to quantify money laundering in the worth of physical art, NFTs don’t have that problem. NFTs provide a better idea of how much money is being laundered. Recently, most NFT marketplaces have become a hub for money laundering.

Why does Wash Trading Affect the NFT Market?

The reason is simple: traders use less liquid NFTs to affect an asset’s price. NFT Wash trading is a major issue for legit investors, the general public, and collectors. 

As investors have to rely on quantifiable data to make a decision, most of them end up making the wrong choices. Specialists have to look at data changes to promote NFT Investments and prevent the Wash trading scams. The NFT community is most riddled with scammers. Wash trading is becoming a common practice that regulators can use to fight the decentralized nature of the Crypto space. 

Due to wash trading, traders and investors are unable to make smart and informed decisions about their purchases. So, is there a way to identify wash trading in the NFT market?

When new coins are released in the market, they’re completely fresh and have no old data. Thus, developers and insiders may perform wash trading to boost the value of the coin. So, it’s better to stay away from such digital assets.

When it comes to NFTs, limited NFTs have investor interest or trading activities. So, the NFT owners get into wash trading to entice new traders to buy the NFT at an enormous cost. 

To not fall prey to wash trading scams, a trader should always focus on established crypto with higher volume. Scammers need more money to effectively manipulate the market. So, avoiding new currencies can prevent them from doing so.