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How to Enhance Vendor Onboarding Process: Best Practices, Process, and Rules to Follow

Post author By admin
Post date July 19, 2024
Categories Business

Vendor onboarding is a tricky yet extremely meticulous process. Supplier relationship management is a systematic process that allows businesses and organizations to collect documentation and data to qualify, approve, and contact vendors, purchase goods or services, and make timely payments to supply partners. Vendor onboarding compliance is tough as numerous steps are involved.

A vendor is an entity that sells any specific product or service to your business, either for your business to sell it or as part of an item that you resell. The vendor onboarding process for e-commerce or other businesses is pretty much similar to employee onboarding, in which new members of a business learn about a company’s practices, processes, compliance, expectations, etc. There’s a lot to understand about vendor onboarding, doing it wrong can open the business to countless frauds.

Vendor Onboarding Best Practices

A proper and flawless vendor onboarding checklist can help your business avoid hefty mistakes. An improper vendor onboarding process can lead your organization to legal and compliance risks. There are some best practices that you can follow to bypass the vendor onboarding challenges.

Know Your Rules

Before onboarding a vendor, your business should list and understand all the local, and global legal and compliance issues that apply to your industry and business. This assists in better vendor onboarding compliances.

Educate Yourself

Read and understand all the technical challenges of supplier onboarding related to your business type. Education can lead to a better understanding of how to secure your business against vendor fraud.

Prequalifying Is Important

Reduce your chances of risk and fraud by pre-qualifying vendors. Prepare a list of vendors based on their track record, willingness, and ability to meet up your organizational needs. This way you won’t be blindsided while onboarding a vendor. Verification can be done using vendor onboarding documents and ID verification solutions.

Build Thorough Contracts

Each vendor and supplier needs to have different types of contracts. To successfully onboard a vendor, you may want to build additional governance for strategically important suppliers. The best vendor onboarding solutions can help you in verifying your vendors and assist in building contracts.

Secure Information

It is always a good choice to secure your financial information from vendors, suppliers, and other third-party suppliers. You should use the latest technology and other solutions to verify if the vendors are legit and won’t cause any future problems.

Think Strategically

Design your vendor onboarding process with global compliance rules in mind and a proper idea of business that aligns with your business needs. Your strategies need to benefit your business and support your financial goals.

Track Data and Do Expense Analysis

Tracking data is always an important part of any onboarding process, be it employee onboarding or vendor onboarding. With constant data analysis, you can learn where to make improvements in your process.

Implement Internal Training

You need to make sure that every member of your team understands the steps of the onboarding process and the software that is used to verify vendor identities and documents.

Keep Team Members and Vendors Informed

Provide timelines and make sure your vendors follow through with them. Your team should be able to manage and deliver a plan. Your vendors should be aware of what you’re expecting of them, share this information with your vendors, and manage your expectations.

7 Mistakes to Avoid During Vendor Onboarding

Mistakes that are made during vendor onboarding are typically failures related to accountability, planning, compliance, and training. Now that you know what is vendor onboarding process is, the next step is to save organizations from risks. The best way to avoid mistakes is by following the best practices mentioned above and making sure to not make common mistakes. Avoiding vendor onboarding mistakes can offer great benefits to your company.

Here are all the mistakes you need to avoid during the Vendor onboarding process for e-commerce and other industries.

Unable to Get Buy-in from Top Management: Any business vendor relationship success depends on the top to lower-level management support throughout the organization. Without that, a business supplier relationship is bound to fail.
Failure to Choose Ideal Team Members: Accountability on your business’s end is the key to success. If your business is accountable for the work, the vendor partners will follow through.
Failure to Plan: A slow and tedious attitude will inevitably lead to performance issues between a business and vendors. You need to build your plans for the future for smooth operations.
Failure to Train: Without the right training and knowledge, your employees and vendors won’t be able to work ideally side by side together. Businesses need to provide proper training internally and externally.
Failure of Proper Compliance: Failure to find proper potential vendors and lack of proper following of compliance can lead to friction full business relationship.
Failure To Communicate: Improper communication is never a good thing in a business relationship. Keeping the vendors and everyone in your business in the loop is something businesses need to follow through.
Failure to Build Flexibility: A business should have the ability to go with the flow, continuous improvement requires a willingness to refine the business operations based on changing trends. To improve the vendor onboarding process, businesses need to be flexible.

Benefits of Proper Vendor Onboarding Compliance

Shifting your procurement and vendor relationships from old processes to a more strategic function offers benefits beyond competitiveness, it also helps improve efficiency, mitigating risks, better relationships, and a better brand reputation. Here are all the benefits that come along with a proper business onboarding process:

Greater Competitiveness: Most firms in manufacturing tend to spend more than 40% of their every dollar of sale on materials and goods. To achieve business goals, vendor management and close attention to buying performance can be critical factors in a firm’s competitiveness.
Improved Efficiency and Profitability: The right vendor can make or break your business. Whenever you streamline the current buying processes and make use of data collected by vendor performance. Right decisions can help you avoid income and productivity losses. A streamlined process leads to less waste, a higher productivity level, and reduced startup times.
Reduced Risk: Whenever you comply with industry and government regulations, you need to keep an eye out for your internal policies, verify your vendor’s AML policies and educate them on certain factors. You can even reduce the risks by employing strategic tools like the DIRO’s online document verification tool vendor and business verification.
Stronger Relationships: Vendor onboarding best practices lead to mutually beneficial partnerships which include training, proper flow of communication, and approval.
Boosts Brand Reputation: If your business has a poor-performing vendor relationship, it can impact your brand negatively and cause brand reputation damage. As a business, you need to take charge of your vendor’s performance to improve your reputation with the customers.

Automating the Vendor Onboarding Process for E-Commerce

Automation is always good, there are three main components that a business should consider for vendor onboarding:

Easy integration with internal platforms and systems already available
A self-service portal for vendors
Security to guard against cyber-attacks and prevent the business from financial fraud.

Your cost for vendor onboarding depends on the size of your business operation and the number of vendors you are currently working with. If you already have good working relations with a variety of vendors then you will need a system that can handle your growing needs.

How DIRO Can Mitigate Vendor Onboarding Fraud?

During the pandemic, the number of onboarding frauds has grown exponentially. According to a report by Bnn Bloomberg, NASA incurred a loss of $700 million due to the supply of faulty aluminum products. To avoid this income and productivity loss, businesses need to use solutions that can help verify vendors during the onboarding process. Vendor onboarding documents and ID verification are crucial for mitigating fraud.

DIRO’s online verification solution can reduce fraud, improve business relations and improve productivity. DIRO’s solution can verify vendor documents in an instant and assist in complying with AML regulations. The output of the solution is a court-admissible document with forensic data and a digital hash that makes the documents immutable. Being able to differentiate between legit and fake vendors during the first part of the onboarding process is something that every business needs.

Tags vendor onboarding best practices, vendor onboarding challenges, vendor onboarding checklist, vendor onboarding compliance, vendor onboarding document, vendor onboarding process for e-commerce, vendor onboarding solutions, what is vendor onboarding process

Online Financial Fraud Trends 2024 – What You Need to Know🤔

Post author By admin
Post date June 27, 2024
Categories Fraud

2024 has been a turbulent time for financial safety. Fraudsters are finding new and innovative ways to commit fraud. With cutting-edge technologies, fraudulent organizations are exploiting the digital financial ecosystem.

Businesses that want to combat or prevent online fraud proactively must rely on sophisticated technologies. To keep your business protected, here are the fraudulent trends that you need to keep an eye on.

Online Fraud Trends to Know in 2024

One thing to know about the fraudulent landscape is that it changes quickly. Not paying attention to emerging trends can lead to hefty losses.

Staying ahead of the curve means understanding the emerging tools and techniques that criminals use. With generative AI models now available to anyone, staying up-to-date on fraud trends is more important than ever.

1. Cyber-Enabled Fraud (CEF)

Cyber-enabled fraud (CEF) is a new and growing fraud trend. CEF includes organized crime syndicates that exploit advanced digital technologies and use AI to trick victims.

These syndicates are structured into specialized groups, including those focused on money laundering operations to process ill-gotten gains.

CEF money laundering networks use a range of methods, such as money mules, shell companies, and legitimate businesses, across different types of financial institutions, including banks, payment services, and virtual asset service providers (VASPs).

CEF money laundering often exploits weak know-your-customer (KYC) policies, and businesses that overlook the importance of robust verification processes. Allow the syndicates to take advantage.

Some red flags that help detect suspicious transactions related to CEF include:

Transfers of funds to and from high-risk money laundering jurisdictions
Large frequent transactions with recently established companies
Rapid or immediate high or low-value transactions from newly opened accounts
Transactions or activities inconsistent with the purpose of an established account, entity, or beneficiary

2. Heightened Crypto Risks

The rapid rise and general access to cryptocurrency-enabled technologies necessitates closer oversight. Their decentralized, virtual nature makes them appealing for fraudulent activities. Cryptocurrencies are unsupervised by any government or central bank, completely anonymous, and allow for purely digital transactions.

The Financial Action Task Force (FATF) pioneered a comprehensive strategic response to cryptocurrency risks in 2018, amending its standards to include cryptocurrencies explicitly, followed by updates and clarifications.

Its regulatory framework for cryptocurrencies parallels traditional financial oversight, mandating countries implement the full AML/CFT framework with adjustments for the unique technologies involved.

Continuing this pattern, European regulations like the Markets in Crypto-Assets (MiCA) outline how crypto businesses must adhere to stringent anti-money laundering standards, reflecting the global push for more secure and regulated online financial activities.

3. eCommerce Scams

eCommerce consumers are seeing a rise in scams due to vague business policies and deceptive practices on eCommerce sites, from misleading product representations to aggressive sales tactics.

Awareness of these red flags is crucial for consumers and businesses to safeguard their interests.

Common Signs of Potential Scams

Unclear shipping details indicate a lack of transparency about costs and policies
Poor product presentations, such as low-quality images or errors in descriptions
Extremely low prices, especially for well-known brands
Urgency tactics or high-pressure situations that encourage immediate purchase
Absent contact information or non-functional contact methods

4. Ambiguous AI

While AI significantly boosts the fintech sector’s efficiency and accuracy in detecting fraud, it introduces complex challenges. The lack of standardized regulations for AI’s responsible use and the biases embedded in AI systems complicate adherence to compliance and ethics, necessitating a prudent approach to deployment.

Marketplaces must carefully manage potential biases affecting decisions in crucial areas. The technological advances of AI that empower fintech firms also create vulnerabilities that cybercriminals exploit, requiring stringent security strategies to counteract these evolving threats.

When implementing AI in fraud detection or related applications, organizations need to be aware of several red flags to ensure the technology is used effectively and ethically.

Some examples include:

Unexplained decision-making: AI systems that do not provide clear, understandable explanations for their decisions. It is crucial that AI decisions can be interpreted and justified, especially when they affect financial transactions or customer relationships.
High false positive rates: If an AI system often mistakenly flags legitimate transactions as fraudulent, it may suggest issues like overfitting or incorrect feature weighting in the model.
Lack of adaptability to new fraud techniques: AI systems that are not regularly updated or trained on new data may fail to catch novel or evolving fraud tactics.
Ignoring contextual and qualitative data: AI models that rely solely on quantitative data and ignore qualitative contextual information may miss important cues that can indicate fraud.

5. Misuse of NGOs and Crowdfunding Platforms

Crowdfunding platforms and NGO misuse are primary concerns for the FATF, presenting unique obstacles for online business operations that require robust, proactive defenses.

Criminal organizations cleverly mask their fundraising activities on social media. They act as legitimate humanitarian efforts linked to charities, complicating tracking efforts by the intelligence community, private sector, and donors.

They channel funds through various means, including:

State funding through cash transactions, cross-border payments, trade-based terrorism financing, exchanges, and banking systems
Business portfolios, including real estate and investments
Fundraising through social media and crowdfunding initiatives via bank accounts, payment services, and crypto exchanges
Misdirected humanitarian aid

Why It’s Important to Keep Track of Emerging Fraud Trends

Keeping an eye out for all the emerging fraudulent trends helps businesses stay ahead of the curve and spot red flags before anything happens. Here are some key trends to keep track of emerging fraud trends:

Proactive Risk Management

By being aware of emerging fraud trends, organizations can take proactive measures to prevent fraud before it occurs, rather than reacting to it after the fact.

Identifying new fraud patterns early allows for the timely implementation of controls and mitigation strategies, reducing the potential impact.

Protecting Financial Interests

Fraud can lead to significant financial losses. Staying ahead of emerging trends helps minimize these losses by ensuring that adequate safeguards are in place.

By preventing fraud, companies can protect their profit margins and maintain financial stability.

Safeguarding Reputation

An organization that actively prevents fraud demonstrates its commitment to integrity and security, thereby maintaining the trust of customers, partners, and stakeholders.

Avoiding high-profile fraud incidents helps protect the organization’s brand and reputation in the market.

Regulatory Compliance

Many industries are subject to regulations that require them to implement specific fraud prevention measures. Staying informed about fraud trends helps ensure compliance with these regulations.

Non-compliance with regulatory requirements can result in significant fines and penalties. Keeping up with fraud trends helps organizations stay compliant and avoid such costs.

Enhancing Security Measures

Fraud tactics evolve rapidly, and security measures must adapt accordingly. Tracking emerging trends ensures that security protocols remain effective against the latest threats.

Staying updated allows organizations to integrate new technologies and methodologies that can better detect and prevent fraud.

Conclusion

By staying informed and adapting to new fraud trends, organizations can better protect themselves and their stakeholders, ensuring long-term sustainability and trust.

Malware-Based Phishing Attacks and Effective Countermeasures

Post author By admin
Post date April 23, 2024
Categories Fraud

In today’s digitally driven world, phishing attacks have evolved into sophisticated and malicious schemes that target unsuspecting individuals and organizations. One particularly insidious form of phishing is malware-based phishing, where attackers use malicious software to steal sensitive information or gain unauthorized access to systems.

In this guide, we’ll delve into what malware-based phishing entails and explore strategies to combat it effectively.

What is Malware-Based Phishing?

Malware-based phishing, also known as “phishing with a payload,” involves the use of malicious software to deceive users into divulging confidential information, such as login credentials, financial details, or personal data.

Unlike traditional phishing, which relies solely on social engineering tactics like fake emails or websites, malware-based phishing incorporates malware as a means to compromise systems or steal data.

Common Types of Malware Used in Phishing Attacks

Trojans: These are malicious programs disguised as legitimate software, which can create backdoors or steal sensitive information from infected devices.
Keyloggers: These tools record keystrokes, allowing attackers to capture passwords, credit card numbers, and other sensitive data entered by users.
Ransomware: This type of malware encrypts files on the victim’s system and demands payment for their release, often delivered through phishing emails containing malicious attachments.
Spyware: Designed to spy on users’ activities without their knowledge, spyware can gather sensitive information and transmit it to attackers.

How to Combat Malware-Based Phishing?

1. Employee Training and Awareness:

Educating employees about the risks of malware-based phishing and providing regular training on identifying suspicious emails, attachments, and links is crucial.

2. Implement Robust Email Security Measures

Utilize email filtering solutions that can detect and block phishing emails containing malicious attachments or links before they reach users’ inboxes.

3. Use Antivirus and Anti-Malware Software

Deploy reputable antivirus and anti-malware software across all devices to detect and remove malicious software effectively.

4. Update Software Regularly

Keep all operating systems, software, and applications up-to-date with the latest security patches to mitigate vulnerabilities that attackers could exploit.

5. Use Multi-Factor Authentication (MFA)

Implement MFA wherever possible to add an extra layer of security, making it more difficult for attackers to compromise accounts even if they obtain login credentials.

6. Be Careful with Email Attachments and Links

Encourage users to verify the authenticity of email attachments and links before interacting with them, especially if they appear unexpected or suspicious.

7. Backup Data Regularly & Setup Recovery Protocols

Maintain regular backups of critical data and establish robust recovery procedures to restore systems in the event of a malware infection or ransomware attack.

8. Monitor and Analyze Network Traffic

Implement network monitoring tools to detect anomalous behavior and potential signs of malware activity within your network.

Conclusion

Malware-based phishing attacks pose significant risks to individuals and organizations alike, threatening the confidentiality, integrity, and availability of sensitive information and systems.

By understanding the nature of these attacks and implementing proactive security measures, such as employee training, robust email security, and regular software updates, organizations can effectively mitigate the threat of malware-based phishing and safeguard against potential cyber threats. Stay vigilant, stay informed, and stay secure.

Embedded Finance is Changing Banking for Firms and Customers

Post author By admin
Post date February 6, 2024
Categories General

Embedded finance is streamlining banking and digital payments for consumers who need secure digital banking services. At the same time, it is facilitating growth and innovation for new brands and launching new products and services with ease. Almost a decade ago, challenger banks and neobanks gave birth to the FinTech revolution. As technology evolved, the role of FinTechs became more prominent in the industry.

Traditional banks took notice of the potential of FinTechs and how they can help in providing a seamless customer experience during onboarding, digital banking services, and payments. After the COVID-19 pandemic, the digital banking revolution was pushed forward. Today, there are apps for almost every financial service customers can think of including insurance, investments, mortgages, pensions, and digital assets. The next step in building seamless digital banking services is Embedded finance.

So how can embedded finance help non-finance brands to offer financial services to customers and how can it help in making banking services seamless for consumers?

What Is Embedded Finance?

The simplest way to explain embedded finance is in-app payments whether a customer is using a taxi app “Lyft” or buying takeaway through a food application. Embedded finance involves integrating a financial service into a non-financial application. For users, it provides quick and seamless payments and an incredible customer experience.

There’s no limit to the use cases of embedded finance and the primary function of embedded finance is providing seamless customer payments. But the use case of embedded finance is starting to go beyond just payments and more and more non-financial industries are entering the financial ecosystem to provide better digital banking services to the customers. By properly implementing embedded finance, all banking tasks can be achieved virtually, such as investments, borrowing and lending, insurance, credit card applications and so much more.

Embedded Finance, FinTechs, and Non-Finance Companies

With the constant developments in the banking sector, it is possible that the current landscape of the financial industry will be completely different in the next 10 years. Unlike the digital transformation of the banking industry, embedded finance has had a slow start/ Over the last couple of years, the use of open banking APIs for customer onboarding, KYC verification, payments, and fraud prevention has become standard.

Open Banking APIs are essential for embedded finance to survive and grow as open banking APIs allow software systems of different companies to seamlessly communicate with one another. Open banking has also gained momentum all over the world as it opens the door to open finance.

As embedded finance services rely on APIs and BaaS (Banking-as-a-Service) to integrate financial services into non-financial services, any brand or company or FinTech can now offer a plethora of financial services without actually having to convert into a bank. All this transformation in the industry offers customers more choices and a seamless digital baking experience.

Businesses operating outside of the financial industry can use open banking APIs and embedded finance to deliver financial services and reach out to the unbanked and underbanked population. Tesla’s Insurance package is the prime example of non-finance businesses venturing into the financial industry. Embedded finance is a great opportunity for brands as they can build new products and services and reach out to a whole new segment of customers to increase their profits.

Benefits of Embedded Finance: Customers and Businesses

The benefits of embedded finance go beyond just opening up new revenue streams for businesses. Even a few years ago, the development and launch of a new financial product required significant investment in terms of both money and manpower. Businesses had to overcome several challenges just to put out a new service in the market. That has changed because of embedded finance, as FinTechs now handle the development, integration, and compliance factors, and brands can rent or buy the financial product and provide their customers with a new segment of financial services.

As for the customers, the benefit is in terms of convenience, security, and seamless payments from anywhere, anytime just by using smartphone apps. The reason why customers across the globe have come to love embedded finance is that they can conduct every activity with a familiar UI. This leads to elevated levels of positive customer experience, as customers don’t have to be redirected to some complex and difficult-to-use webpage to make payments.

This doesn’t mean that traditional banks will cease to exist altogether, while open banking APIs and embedded finance are being utilized on a global scale, millions of customers still only trust banks to handle their money.

How Embedded Finance and FinTechs Enhance the Banking Industry?

1. FinTech is a Growing Ecosystem

There are tons of technological ecosystems that are turning heads, such as InsureTech, PropertyTech, InvestTech, but FinTech is a culmination of all these ecosystems. Whatever the new technology, embedded finance will still provide the foundation for a new ecosystem. Account aggregation and online customer/ID verification can’t be possible without FinTech as a foundation.

2. Embedded Finance Eliminates Complexity

All the embedded financial products are ultimately all about removing complexity from financial activities. Companies use embedded financial components to remove complexity from the process and increase user experience.

Instead of visiting another webpage, a consumer gets access to payments in the current ecosystem. This increases customer experience, strengthens security, and reduces the complexity of the process.

3. Embedded Finance Will Offer Better Financial Control

In this newly growing financial landscape, customers need better control over their finances. With customers becoming more comfortable with technology, their outlook on their personal finances is also changing. It’s critical that embedded finance applications leverage as much customer data as possible. This provides customers with more control over their financial data.

4. Use Existing Resources

Most businesses shy away from embedded finance because of the expenses. But, the truth is that organizations don’t need to worry about expenses and resources. The resources needed to acquire new customers and build high-end infrastructure. By including a financial angle to create new financially embedded products, you can easily modify the current system.

5. Improved Customer Experience

Embedded finance helps companies create a seamless journey for their customers. Offering more services to the customers will eliminate their need to deal with third-party vendors for completing their transactions. This leads to higher profits, and the direct connection between customers and the company will improve the customer experience.

Key Components of Embedded Finance

APIs (Application Programming Interfaces): At the core of embedded finance are APIs, serving as the technological backbone that facilitates seamless communication between different systems. These APIs enable the exchange of data and functionalities, allowing non-financial platforms to effortlessly embed financial services.
Digital Payments: Embedded finance has revolutionized payment methods, from one-click transactions to digital wallets. Users can complete transactions without leaving the platform they are using, streamlining the payment process.
Lending and Credit: The integration of lending services into e-commerce platforms has become commonplace. Embedded lending allows users to access credit seamlessly during the checkout process, enhancing the overall user experience.
Insurance Integration: Platforms can now offer embedded insurance solutions, providing users with relevant coverage based on their activities or purchases. This integration simplifies the process of obtaining insurance within the platform.

Common Challenges in Embedded Finance

Regulatory Compliance: The financial industry is subject to rigorous regulations, and ensuring compliance with diverse laws across jurisdictions poses a significant challenge. Navigating this complex regulatory landscape demands a nuanced understanding of financial laws and diligent adherence to compliance requirements.
Security Concerns: With the integration of financial data into non-financial platforms, the risk of data breaches and cyber-attacks intensifies. Maintaining robust security measures to safeguard sensitive financial information is paramount to building user trust and ensuring data integrity.
User Trust: Establishing and preserving user trust is critical in the financial sector. Embedding financial services within non-financial applications necessitates transparent communication about data usage, security protocols, and the overall user experience to foster confidence among users.
Interoperability: Achieving seamless interaction between embedded finance solutions and various systems and platforms requires addressing the challenge of interoperability. Standardized protocols and effective collaboration among different stakeholders are essential to overcome this technical hurdle.
Technology Infrastructure: Implementing embedded finance necessitates a robust and scalable technology infrastructure. Ensuring that the systems can handle the integration of financial services without compromising performance is a crucial consideration.

Future of the Banking Industry

The constant technological development in the financial industry may act as a threat to traditional banks. This is because tech-savvy customers will choose digital services over physical ones. The truth is that neither banks nor FinTechs can survive without the other one. FinTechs don’t have the expertise or resources like bank account verification software or online KYC verification software to keep up with KYC and AML compliance changes and handle millions of customers. Traditional banks on the other hand don’t have the expertise in developing strong and robust digital platforms for their customers.

In this situation, the ideal step to enhance the financial industry for both businesses and customers is to build strong Bank-FinTech partnerships that can take advantage of the best features.

Tags benefits of embedded finance, Embedded Finance, what is embedded finance

Why Are AI-Based Document Verification Solutions Becoming Weaker?

Post author By admin
Post date September 4, 2023
Categories Document

Artificial intelligence (AI) allows computers to make human-like decisions, making certain processes more efficient. AI technology has improved a lot in recent times and it powers a lot of things such as self-driving cars, and facial recognition. Recently, AI has been applied to online identity verification and online document verification solutions. While the incorporation of AI brings in a lot of benefits, AI solutions are slowly falling prey to sophisticated techniques used by fraudsters. AI-Based solutions are slowly failing in comparison to other online document verification solutions.

The Growth of ID-Based Transactions

Banking, healthcare, government, and other industries use ID verification and authentication to verify accurate information about their customers and prevent ID fraud. Digital banking transactions are growing rapidly in correspondence to customer needs, with the rise of digital banking comes online fraud. As fraudulent transactions continue to rise, it is vital for businesses to choose strong document verification solutions.

Most businesses choose to opt for AI-based online document verification solutions. Artificial Intelligence is a part of machine learning which makes it possible to verify and authenticate identities. Machine learning-based solutions keep learning from the data they have access to. This helps organizations to keep track of their performance.

Fraudsters can easily feed wrong data to a bank’s online ID and online document verification solutions which can make them obsolete over time. To keep the AI-based online document verification solutions efficient in detecting fraud, the developers have to keep making changes according to new fraud trends.

Machine Learning for ID Proofing

Machine learning is definitely an efficient tool for differentiating between real and fraudulent IDs. Computer software is constantly learning and correcting itself and can process tons of transactions at a rate that can’t be achieved by humans.

However, IDs are physical documents often affected by wear and tear and may feature manufacturing discrepancies. If the model for failing IDs is based on a few samples, AI-based solutions won’t be able to recognize different types of IDs. This is one of the main weaknesses of AI-based online document solutions.

A blend of AI and Human Touch for Better Solutions

Trained professionals who use AI-based solutions can step in to prevent the failure of AI solutions because a document is torn or worn out. During instances where solutions fail to identify a fake identity, a document expert can check for the mistakes made by a document verification solution. However, the whole point of using an automated solution is to reduce the time spent on human document verification.

The best way to use AI-based online document verification technology is to blend them with a touch of humans. Businesses want to be able to improve the customer experience during the customer onboarding process. A good ID verification solution will help you achieve that, but a weak algorithm-based online document verification solution will just increase the error rate. Fraudsters can easily take advantage of those weak points which leads to identity theft, money laundering, and stealing.

What Makes DIRO’s Online Document Verification Solutions Different?

DIRO’s proprietary online document verification technology takes the document verification process a bit beyond the normal norms. Banks, financial organizations, and other organizations can use DIRO’s technological solutions to verify all kinds of online documents from all over the globe.

DIRO can verify documents like:

Driver’s license
Passport
Insurance papers
Bank statements
Bank account holder information
Utility bills (Electricity bill, Water bill, Cable bill, landline, or telephone bill)
Tax assessment online
Lease agreement online
Mortgage statement online
Government authority online
College enrollment online and much more.

DIRO online document verification technology provides 100% proof of authentication. The technology also places online verified documents on the blockchain to make the information immutable.

DIRO’s Technology vs AI-Based Solutions

DIRO’s Online Document Verification	AI-Based Document Verification
Verifies document data by comparing information right from the original web source.	Verifies document data using machine learning.
Can verify any type of online document.	Can have problems verifying old documents with wear and tear.
Verifies online documents instantly.	Can take a few minutes based on the technologies applied.
Can verify documents from all over the globe.	Not all AI-based solutions are built to verify online documents from all over the globe.
Provides 100% proof of authentication.	Not all AI-based solutions offer proof of document authentication.
Place documents on the blockchain to secure customer information.	Requires huge servers for customer information storage.
Can’t be tempered by feeding the wrong data.	AI-based solutions are easy to tamper with by fraudsters with constant access to fake data.

Usually, most online document verification solutions aren’t as efficient as they should be. AI-based online document verification solutions, if not used ideally can cause more loss than profits for businesses. DIRO’s online document verification solutions bypass that barrier by being capable of verifying documents instantly with 100% proof of authentication. This leads to increased user experience and rate of customer onboarding.

Tags ai-based document verification solutions, ai-based solutions, diro technology vs ai-based solutions

About Digital ID Verification Service

Post author By admin
Post date August 29, 2023
Categories Identity

As more and more online activities are growing, keeping our online identity, private data, and ID verification has grown vital. Unfortunately, not all banks and financial institutions know everything there is to know about Digital identity verification.

Digital ID verification is crucial in all kinds of online business operations. Knowing who your customer is before the onboarding process can minimize the risks of financial crime. There are a lot of things that are to be known about Digital ID verification that most people don’t.

What Is Digital Identity Verification?

The digital era has given birth to online identities and electronic documents. Same as physical documents, these online identities require online identity verification methods. An online document can be almost anything, a government-issued ID, online driver’s license, student records, bank account holder information, or more. The use of technology to make sure these electronic documents are authentic is known as online user identity verification.

There are countless identity verification solutions out there but the best online identity verification methods verify electronic documents to verify identity.

Things to Know About Digital ID Verification Service

1. Implement Facial Recognition Wherever Possible

Technology is an ever-evolving factor, it’s growing at an incredible speed and the smartphone in our pocket is a technology that can offer multiple benefits. It provides a facial recognition technology that wouldn’t have been even possible a few years ago.

Facial recognition technology is already being applied to catch criminals, log in to campus and so much more. Governments and other organizations are making use of facial recognition software. The technology uses a lot of sophisticated algorithms which scan your face and identify your facial biometrics.

While there is a long debate on the regulation of the technology, the simplification, and usefulness of facial recognition technology state that you’ll be seeing more of the technology in the future.

The first thing that you need to know about digital ID verification is that modern digital identity verification is not as secure as you would want it to be. If banks and financial institutions could apply special-grade facial recognition in their KYC compliance process, the risk of financial fraud would drop by a lot. The use of facial recognition can make identity verification solutions more effective and less capital-consuming.

2. Digital ID Verification is Crucial to Mitigate Identity Theft

In this digital world, identities are one of the most common targets for criminals. If you want to reduce fraud fight identity fraud and combat identity theft, websites and companies are using real-time ID verification to make sure that customers are who they really are. Simply put, identity verification is growing at an alarming pace as identity theft is the favorite crime for cyber attackers.

The good news is that digital identity verification solutions that are available online can allow banks, financial institutions, governments, and other organizations to fight identity theft. One of the ways to fight ID theft is by verifying documents and DIRO document verification service can help you verify original documents whenever you want.

The second thing that you should know about digital Identity verification is that verifying a physical person in the verification process is the ideal way to fight identity theft.

3. Acquiring a Bank Account Will be Easier With Document Verification Technology

Opening a personal and business account is a tough thing to do, KYC compliance can be a painful process for customers. KYC compliance requirements take an average of 24 days to complete. That whole process is frustrating enough, and to make matters worse, some banks don’t even share your KYC information between internal departments, which results in repeated requests for the same documents over and over again.

Although, things seem to be changing for the customers as smart KYC systems are slowly growing. DIRO document verification technology helps improve the overall KYC and AML compliance process by verifying original documents in under 60 seconds.

The third thing you need to know about digital identity verification is that it is more than just convenience. Document verification solutions like DIRO could save organizations a lot of money.

4. Digital ID Verification Reduces the Risk of Human Error

Long before technological advancements made things smoother, document verification and identity verification were done manually. Making mistakes is human nature and it is the very thing that makes us human. Even the smallest mistake can become the reason for a data breach that can cost organizations hundreds of millions of dollars. It doesn’t matter if the data breach is malicious or accidental, data breaches have exposed over 4 billion personal records in the last year itself.

Technology can provide you with an ideal solution to document and identity verification services. Technology can help FinTechs reduce costs for manual KYC work, and it also keeps digital IDs safe from data breaches. If you secure your data then you should employ every digital identification protection process that you possibly can.

The fourth thing that you should know about digital ID verification is that a lot of services include “ID verification experts” which is a term referred to as low-paid off-shore employees. These experts have the responsibility of viewing and verifying your identity documents. While these people, in general, are trustworthy, there can be a bad apple every once in a while. So the manual process of sharing identity documents can lead to a huge data breach. DIRO document verification technology can help organizations by making sure they verify original documents.

5. The Government Is Pushing For Secure Digital Identities

The launch of the European General Data Protection Regulation (GDPR) took the world by storm. What you should know is that GDPR is the gold standard when it comes to digital data and identity protection. Companies that don’t comply with the GDPR regulations can have to pay fines that can run a company aground. A social media giant like Facebook is currently paying a fine of $2.23 billion.

This is a great regulation for all the organizations that are concerned about getting their identity stolen due to malpractice by organizations. The last thing that you should know about digital ID verification is that regulations like GDPR make sure that organizations stay in line.

Digital Identity Verification Best Practices for Financial Institutions and FinTechs

Online account opening, transactions, and similar activities have increased tremendously in the last decade. Not just convenience, online banking also provides a platform that fraudsters can manipulate. Verifying digital identities is a crucial step in preventing fraud in online banking.

Digital identity verification has to be part of the entire customer journey, from onboarding new customers to returning customers and approving high-risk transactions.

KYC and identity fraud prevention solutions in the customer onboarding process aren’t as great as for customers with a limited digital footprint and with thin files.

To ensure fraud is controlled, there are some digital identity verification best practices financial institutions and FinTechs need to use.

Avoid Friction Filled ID Verification Methods

To verify “grey applicants,” some organizations apply additional verification measures such as knowledge-based authentication (KBA). A lot of other organizations push the application for a manual review. These processes are full of friction, expensive, and time-consuming.

KBA almost always offers a poor customer experience and is easily manipulated. KBA is no longer considered a secure customer verification method, as attackers can quickly find answers to the questions.

Many FinTechs have found that a 100% KBA score is the primary indicator of fraud.

If the application is pushed to manual review, applicants wait for hours, days, or weeks. If it takes this long for a customer to be approved, they will likely abandon the process.

A great approach to solving these challenges is to build seamless workflows that offer enhanced ID verification software with accuracy and a great customer experience.

Solutions like DIRO’s document verification solution provide financial institutions a way to verify banking information, address documents, and other KYB information more quickly and securely.

A combination of DIRO and human effort provides a cost-effective and scalable solution for onboarding customers and businesses. It cuts down on onboarding times dramatically while enhancing security.

Not all document verification solutions can meet the demands of financial institutions. Legacy document verification solutions only focus on ensuring the authenticity of the physical ID of document templates.

This can be an excellent first step. But, fraudulent documents and stolen IDs must be verified to ensure they haven’t been tampered with. DIRO verifies document data directly from the issuing source, preventing the use of fake and stolen documents during onboarding.

Best Practices for Digital Identity Verification

Establishing digital identity verification best practices is vital to optimizing your company’s verification process. Here are the best practices we recommend businesses to follow:

Multiple Verification Methods

A single solution like KYC and KBA isn’t enough to keep fraudsters at bay. Two-step verification is the basic standard across all industries. To increase security and reliability, using multiple digital ID verification methods enhances verification accuracy.

Stay Up-To-Date With Regulations

Staying updated with regulations is the best way to keep up with digital identity verification. These include KYC and AML requirements. Stay up to current laws and ensure the organization complies to avoid loss and legal penalties.

Third-party verification solutions such as DIRO document verification help enhance the digital ID verification process and comply with regulations.

Verify Users

Customer verification needs to be part of every step of the customer journey. Not just onboarding but continuous monitoring and transaction monitoring should be implemented.

Fraudsters build perfect synthetic identities to trick the onboarding processes. This is why financial institutions and FinTechs must implement continuous onboarding to monitor customers.

Factors to Consider While Choosing Digital ID Verification Providers

Before finalizing any third-party digital document verification solution providers, there are some factors businesses need to keep in mind. Such as:

Security

Choose a provider with robust security to protect personal information while preventing fraudulent activities.

Reliability

Legit customers being mistakenly flagged as fraudulent can be incredibly harmful to businesses. Choose a provider that ensures you can verify documents with 100% accuracy and reliability.

Compliance

Improper compliance and misidentifying regulations are dangerous for businesses. Whatever third-party provider you choose, ensure they comply with all the latest laws, such as KYC, AML, and local regulations, to prevent fraud.

User Experience

While your primary goal is to avoid fraud and detect fraudsters, providing them with a great user experience is essential. Customers abandon the onboarding process when the process is clunky and cumbersome.

Choose a provider that can offer a user-friendly solution.

Integration

Find a document verification solution provider that can integrate seamlessly into your current process. Choosing a provider with an easy integration system will reduce the cost of implementation and also improve efficiency.

Scalability

You need a solution that can grow alongside your business. Choose a provider that offers scalability. Make sure that your provider can meet current and future business needs.

Reputation

Choosing a third-party solution with an excellent reputation and a proven track record can do wonders for your business. Having a solution that offers accuracy and reliability during verification by your side is crucial.

How DIRO’s Award-Winning Tech Can Improve Digital Document Verification?

Banks, FinTechs, and governments need to adopt newer technology. The award-winning digital document verification technology can help organizations cut costs, smoothen the onboarding process, and improve the overall KYC process. Using the technology, you can make sure to improve customer experience all the while making sure that financial crime is reduced by a lot.

Understanding what is digital identity verification is the first step in making sure banks and all other financial entities keep up with their KYC compliance. DIRO’s innovative technology captures the documents from their original web source to verify whether a document is fabricated or not.

Tags id verification service, identity verification solutions, online identity verification methods, user identity verification, what is digital identity verification

How DIRO is Changing the Online Document Verification Landscape?

Post author By admin
Post date August 28, 2023
Categories General, Verification

The rise of digital banking services, ACH payment, and third-party payment providers has changed the face of banking. The needs of customers are an ever-changing concept and to facilitate those needs, the financial industry is trying to offer faster and more secure transactions. To enjoy the benefits that come along with digital banking transactions, banks need to provide better security.

Customers from all over the globe can sign up for digital banking services with strong customer Identity verification solutions. Online documents can help banks and other financial institutions verify customer identities seamlessly and offer security to digital banking procedures. The use of documents to verify customer identities before opening a new account is a very old process. Now that banking has shifted online, so has the document verification process. Verification of online documents is really important for secure digital banking operations. By verifying driver’s licenses, proof of address, utility bills, and proof of income, financial institutions can verify customer identities and reduce red flags.

The FinTech Industry is full of solutions that can offer online document verification. AI-driven document verification solutions aren’t 100% reliable. To bridge the gap between security and transparency, DIRO’s online document verification solution helps organizations achieve that.

DIRO is an award-winning online document verification technology that captures information directly from the original web source to verify documents. The document it verifies holds a stronger proof of authenticity as opposed to sharing and verifying original copies in person or uploading copies online. Using DIRO’s technology can help you access all banks, utility companies, and government databases with automated user consent and a strong Multi-factor authentication impersonation check.

Some of the major features of DIRO’s online document solution are:

Can verify online documents globally.
24/7 live coverage for online document verification.
Instant document verification at any time.
5000+ document types to verify from.
Verified documents can be tamper-proof as documents are provided a Digital fingerprint and uploaded on the blockchain.

Different Types of Document Verification Methods

The concept of verifying documents for opening a new bank account or signing up for new services is relatively new. There are two types of methods for verifying documents. In the past, banks used to rely on human resources for verifying documents which were slow, tedious, and error-prone.

Here’s a breakdown of types of document verification methods.

1. Manual Document Verification

Verifying customer documents like government-issued identity documents, address proof, income statements, insurance documents, etc. for account opening and signing up for other banking services. Manual document verification relies on human resources to check for details in the documents. Humans can be easily tricked with fake documents created using image doctoring software.

A business can be easily tricked and harmed by fraudsters using sophisticated technological methods. For humans, there is no way to distinguish between original documents and doctored documents. Manual document verification methods are slow, insecure, and inefficient.

Manual document verification methods are easy to trick.
Take up a lot of time and resources for limited results.
A slow process that leads to slow customer onboarding.
Hard to fulfill KYB & KYC compliance with manual methods.

2. Automatic Document Verification

To bridge all the gaps in manual document verification, automatic or online document verification solutions came into existence. With the right kind of technology banks, financial institutions, and FinTechs can easily verify documents for new account opening and signing up for new services.

DIRO’s online document verification technology makes it easy for you to verify online documents like driver’s licenses, proof of address, utility bills, student documents, etc. It provides secure, reliable, instant document verification with 100% proof of authentication. The proof of authentication is a court-admissible document with forensic data.

Instant document verification for improved customer experience and customer onboarding.
Unlike manual verification, you can verify any type of online document globally.
100% proof of authentication.
Captures information directly from the original web source to distinguish between original and fake documents.
Provides a digital fingerprint for authentic documents and uploads documents on the blockchain.

What Makes DIRO Different From Competitors?

There are a variety of document verification solutions available in the market, but most of them rely on machine learning and artificial intelligence (AI). Online document verification solutions that are driven by AI aren’t as reliable as claimed. AI-driven document verification solutions can be tricked by fraudsters with a constant feed of false data. AI-based online document verification solutions verify documents by verifying document data. Fraudsters can feed an array of false data that can help to trick solutions into thinking that it’s the real document.

DIRO technology, on the other hand, verifies documents by capturing information directly from the web source. Here’s a comparison of DIRO’s online document verification solution and other verification solutions.

DIRO	Brand A	Brand B	Brand C
Instant document verification	30-50 seconds for document verification	Up to 1 minute for document verification	Up to 1 minute for document verification
5000+ types of documents for verification	3000+ types of documents for verification	3000+ types of documents for verification	4500 types of documents for verification
100% proof of authentication	No proof of authentication	No proof of authentication	No proof of authentication
Verified court-admissible documents	No court admissible documents	No court admissible documents	No court admissible documents
Doesn’t require photos or screenshots for verifying documents.	Requires images for document verification.	Requires images for document verification.	Requires images for document verification.

Conclusion: How DIRO’s Solution is Unique from Others?

Banks, financial institutions, and governments can’t trust photos or screenshots of customer documents as they can be easily doctored using technology. This is the reason why organizations need online document verification solutions that can verify documents instantly, improve the customer onboarding process, and reduce fraud.

DIRO allows customers to provide an original document from any online source like banks, government databases, or private databases for ID verification. DIRO’s innovative solution can be used across banking and other industries.

Why Do Digital Business Operations Need Strong Identity Verification Solutions?

Post author By admin
Post date August 3, 2023
Categories Identity

The impact of the Covid-19 pandemic has forced businesses all over the globe to reinvent their business operations. With more and more customer interactions happening online, the risk of digital financial fraud and identity theft is rising as well. For businesses to keep up with the digitization of basic work operations, and enhanced risk of fraud, digital identity verification solutions are necessary. Digital identity verification services rely on online document verification technologies and DIRO’s online document verification service can help businesses from online fraud.

KYC Identity Proofing

To fight fraud and accomplish reliable and efficient identity verification, you need the help of the best identity & online document verification solutions. Although incorporating digitization into business operations can make sure that your business can support online customer onboarding and improve other online working methods.

Digitization can also increase your business’s exposure to fraud and financial crime online. Comprehensive digital identity and document verification solutions are vital to make sure that companies can provide customers with a secure digital experience and survive in online fraud markets.

Among the largest banks in the United States, digital banking onboarding has grown from 60% to 72%. With increasing numbers of consumers moving towards digital banking platforms, businesses need to keep up with the increased number of documents they need to verify. Online business verification solutions such as DIRO can verify customer documents instantly with 100% proof of authentication. Utilizing this technology, banks, and financial institutions can improve KYC compliance while reducing friction.

Paving the Way Towards a Smart Economy

As the shift towards digital businesses continues, it is also moving us closer to having a smart economy. Being a part of a smart economy can help organizations to scale their operations globally and improve overall productivity.

This expected growth relies on the implementation of Digital technologies such as AI, Blockchain, and data analytics. By using digital identity verification solutions, these digital technologies will be even more reliable, efficient, and secure.

Businesses need to provide frictionless transactions to keep customers happy. Online identity verification and online document verification solutions can help financial institutions to provide a fully digital experience for new and existing customers.

Digital technologies have allowed financial information providers to verify customer identities and verify documents online with a click of a button. By combining these technologies with government and private databases and digital payment aggregators, small and big organizations can create a complete digital experience for customers. While the impact of the pandemic was sudden, the switch to digital ID verification can be done efficiently using these technologies.

Reinventing the Digital ID Verification Process

Ever since the pandemic hit the world, some businesses grew at an exponential pace, while other businesses have failed to cope with the pressure. Instead of trying to get your business back to what it was before the pandemic can be tougher than adopting new digital methods. By choosing a new digital document and identity verification method, businesses can improve their speed, agility, and security. By doing all this, your business will be better prepared for online customer onboarding and following KYC/AML compliance.

Secure and internet-friendly solutions tend to appeal to a wide range of audiences. With the rise of the digital age, more and more customers are facing the risk of financial fraud and identity theft, by employing the right digital identity and online document verification solutions organizations can build brand value. Businesses that embrace online and remote customer onboarding solutions using digital identity verification technologies can close the gaps in their fraud prevention strategy.

Strengthen Your Digital Identity Verification With DIRO

Secure digital identity verification solutions can keep your customers invested in your product and services. Digital identity verification and online document verification solutions can help you scale your business operation.

DIRO’s online document verification technology can help you verify original documents online in real time. This can help banks, financial institutions, and businesses to verify documents instantly and improve the customer onboarding process. The technology can also help you verify identities using online documents such as driver’s licenses, proof of address, insurance information, student records and so much more.

Using the technology, organizations can verify documents and provide proof of authenticity which can be used as original documents as well. DIRO places original verified information on the blockchain and makes the documents immutable.

Fintech Cybersecurity Best Practices

Post author By admin
Post date April 10, 2023
Categories Fintech

best practices for fintech cybersecurity

FinTech firms have become a favorite for fraudsters globally. According to a report, FinTech firms faced 2.5 times more attacks in Q1 2022. FinTech firms deal with sensitive customer data, so they’re a goldmine to fraudsters. The data stolen is used for financial fraud and only makes it that much harder to detect fraudulent activities.

Not only data, but a data breach also costs an organization reputational damage. Handing cybersecurity threats have become a significant challenge for businesses. FinTech businesses must be vigilant and explore every weak point that could leave them vulnerable to attack.

FinTech organizations, regardless of their scale, audience, and location face the same challenges when it comes to supercharging their cybersecurity practices.

Importance of Cybersecurity in the FinTech Industry

Fraudsters love to get their hands on financial data. FinTech firms have become a favorite target because they don’t have to adhere to as many rules as traditional banks. Thus, leaving out potential vulnerabilities in the system.

Products that are not properly protected lead to data breaches, and financial fraud.

Preventing cybersecurity risks requires businesses to develop a proactive risk prevention approach.

Understanding and amending the vulnerabilities in the system can prevent fraud before it even happens.

Cybersecurity Audit Goes a Long Way

There’s only one way to come up with a proactive approach to cyber fraud. Having a proper understanding of your systems, and knowing the vulnerabilities should be your first step.

Businesses won’t get rid of fraud just because new measures are in place. Chances are there will be vulnerabilities in your fraud prevention methods as well. Businesses need to do a complete audit of their products, and their workings to find out the weak points fraudsters could exploit.

Changes in Cybersecurity and FinTech

Cybersecurity practices in the BFSI industry have become incredibly complex. Customers globally want seamless digital banking over traditional banking methods.

Cybersecurity Tips for FinTech

To be able to prevent cyber threats, businesses need to follow a list of practices, including:

1. Build Robust Security Policies

Risk management is combining rules and regulations to come up with policies that address all the vulnerabilities in the system. To prevent cyber risks, businesses need to build security policies.

Here are some things to keep in mind while building these policies:

Set clear goals, objectives, and expectations.
Choose security frameworks and implement them strongly.
Clearly define security processes, procedures, and tools.
Define roles and responsibilities.
Set up continuous risk monitoring.
Build a flexible system that’s able to handle all kinds of fraud.
Update policies regularly.

2. Leverage AI, ML, and Analytics

If fraudsters can rely on sophisticated tech to enhance their attacks, then so can businesses.

Relying on AI, ML, and analytics tools can help businesses spot threat trends, track suspicious activities, and more. AI, ML, and analytics tools can help businesses in identifying:

Financial fraud
Know security threats
Identify emerging risks
Unauthorized data access and usage
Anomalous activities

3. Implement Secure by Design Policies

As a FinTech, it should be your aim that all the products and services you release are secure. Fraudsters aim to find these vulnerabilities so they can exploit them. Make sure these policies include:

Integration of security into the early SDLC stages.
Only work with specific frameworks, libraries, and components.
Continuously test and fix code during the early stages of development.
Fix all vulnerabilities before the release.

4. Continuous Threat Monitoring

Attackers are relentless and they keep on trying until they get a breakthrough. BFSI is a primary industry that’s continuously under attack. It is essential for financial institutions and FinTech firms to continuously look for threats.

Relying on traditional signature-based detection techniques could result in grieving mistakes.

To be able to detect and prevent complicated threats, use the following methods:

Global threat intelligence
Contextual awareness
Custom rules

Centralized visibility is an essential threat-monitoring practice. Real-time alerts and triggers help you improve cybersecurity in FinTech.

5. Manage Vulnerabilities Proactively

As we’ve mentioned above, more than anything fraudsters love to exploit vulnerabilities. Vulnerabilities of any kind can be an entry point for attackers.

FinTech firms need to identify, assess, and prioritize their vulnerabilities. The aim should be to minimize as much vulnerable entry points as possible. Uncover vulnerabilities and fix them before an attacker can exploit them.

6. Implement Zero Trust Policy

Did you know that 60% of instances of fraud happen from within the organization? This is why no one must have unverified access to your company’s assets. Enforcing zero trust policy can help to prevent:

Insider threats
Brute force attacks
Privilege escalation
Data theft

It is advised to strictly enforce role-based, least-privilege access to stakeholders. Moreover, businesses should implement strict password and MFA policies. Encrypt sensitive data with passwords.

7. Manage Third-Party Risks Effectively

Businesses in the BFSI industry rely on third-party components, services, and APIs. With third-party attacks growing more and more every day, handling third-party risks is a major challenge.

Third-party vendors are one of the biggest fraud risks for FinTech businesses. Securely verifying third-party vendors is one of the best ways to prevent fraud. DIRO vendor verification technology is built especially to help financial firms and other businesses prevent vendor fraud. This technology can help businesses verify vendors before onboarding them.

8. Don’t Ignore Robust API Security

Managing API risks is a big part of managing cyber fraud risks. With the growing use of APIs in the BFSI industry, businesses must know how to manage API risks.

9. Build a Culture of Cybersecurity

The banking and FinTech industry suffers from Phishing fraud attacks more than any other industry. To reduce phishing attacks, businesses should aim to teach their customers how to spot phishing emails.

Creating a robust cybersecurity culture within your organization can be done by:

Continuously teaching your employees how to spot fraud.
Employees and customers must know what to click and what not to.
Implement a clear chain of command. Employees should know who to report to when something is suspicious.

Tags cybersecurity in fintech industry, cybersecurity tips for fintech, fintech cybersecurity best practices, how to improve cybersecurity in fintech, preventing cybersecurity risks

Enhanced Due Diligence: How Important is it for Banks?

Post author By admin
Post date September 26, 2022
Categories KYC/KYB

In today’s business and regulatory climate, a business has to take all precautionary steps to prevent fraud. This means identifying and verifying customers’ identities and meeting KYC guidelines. Whenever a financial institution starts a new business partnership with individuals or organizations without fully knowing their past and present business dealings, it can open the business to huge lawsuits and fines. EDD (Enhanced Due Diligence) can help businesses understand their customers.

As a matter of fact, over the last decade over $26 billion in fines have been imposed across the U.S., Europe, APAC, and the Middle East against financial institutions for KYC/AML. But KYC compliance goes beyond ticking some checkboxes. KYC helps financial institutions understand and serve their customers in a better way.

The KYC process is often carried out by financial institutions while opening new accounts with online users. Customer Due Diligence (CDD) is a vital part of KYC verification, which usually involves background checks to assess the risk they pose to a business. In the financial sector, this usually involves verifying the users for creditworthiness and ensuring that these people aren’t on a money laundering or counter terrorism financing watchlist.

Fortunately, most of these verifications and AML verification processes are becoming automated so businesses can offer a better customer experience during onboarding. With Customer Due Diligence (CDD) financial institutions perform important checks.

What is Enhanced Due Diligence?

(EDD) Enhanced Due Diligence is part of the KYC verification process that offers a greater level of scrutiny of potential business partnerships and highlights risks that can’t be detected by customer due diligence. Enhanced due diligence requirements are an upgraded version of CDD that looks to establish a better level of identity verification by using customer ID data and evaluating the risk category of the customer.

EDD is specifically designed for dealing with high-risk customers and large transactions. These customers and the transactions they conduct pose greater risks to the financial sector, these customers and transactions are continuously monitored to ensure that nothing is out of place.

There are several characteristics that EDD from regular KYC policies:

Rigorous & Robust: EDD policies have to be rigorous and more robust and should require more data for customer authentication.
Detailed Documentation: The EDD process has to be documented in detail, and regulators should be able to have immediate access to enhanced due diligence reports.
Reasonable Assurance: EDD requirements require “reasonable assurance” while building a risk profile.
Going Through PEPs: Banks and financial institutions need to pay attention to Politically Exposed Persons (PEPs) lists. People on these lists are viewed as being a higher risk because they are in positions that can be exploited for money laundering.

Another major challenge with EDD is knowing how much information is there to collect. Regulators have consistently favored financial institutions that leverage documented policies & procedures.

More and more companies are combining online identity verification and automated AML screening during the account onboarding process.

KYC Factors for Enhanced Due Diligence

To make sure your enhanced due diligence process is on-point, you need to pay attention to a number of factors.

These factors include:

Location of the business/individual.
Purpose of the business transactions.
Occupation and nature of the business.
The pattern of activity (transaction type, dollar volume, and frequency).
Expected origination of payments and method of payment.
Document of incorporation, partnerships, and business certificates.
Understanding the customer base.
Ultimate Beneficial Owner Verification.
Information about personal and business relationships.
AML policies are set by the business in place.
Third-party documentation.
Reputation in the local market.

There are some cases that demand EDD verification. In Europe, banks and financial institutions are required to conduct EDD for businesses operating in high-risk countries.

The requirement also calls for EDD of Politically Exposed Persons. The new 6AMLD compliance has put additional pressure on financial institutions to conduct more vigorous verification. Negligence or non-compliance can lead to hefty fines.

This pressure has only increased after sanctions on Russian Companies. Banks and financial institutions have to be extra careful about who they onboard.

In April 2022, the Office of the Comptroller of the Currency put additional light on the need for thorough EDD policies. These include:

Maintaining an accurate and complete list of sanctioned companies and high-risk counties.
Evidence of transactions, which includes unexpected activities, and unexpected sources of funds.
Complete analysis of available information. Including red flags in information and making a document of high-risk indicators and suspicious activities.

Enhanced Due Diligence Checklist

So, what do banks and financial institutions get out of using EDD as part of their KYC verification process? Here’s the Enhanced due diligence checklist:

1. Better Serve Your Customers

The EDD and identity verification process offer a bunch of useful information regarding your customers, including employment status, age, and so on. This data can be used to provide customers with better services.

2. Enhance Brand Reputation

Whenever a bank, or financial institution onboards a new customer with EDD, they can help in the prevention of corrupt politicians, criminals, and terrorists from entering the ecosystem. This also means that taking precautions to know your customer at a more fundamental level.

Businesses need to build robust safeguards that help in defending against losses for fraud, non-compliance fines, and loss of brand reputation.

3. Financial Crime Prevention

All the ideas of knowing your customers, verifying identities, making sure they’re real, and cross-referencing customers from PEPs and Sanction lists. Enhanced due diligence and other fraud prevention methods such as bank account verification software allow businesses to focus on scaling their businesses instead.

4. Build Trust

Unfortunately, as more and more cases of data breaches, money laundering, and financial fraud are being uncovered, customers are losing trust in the banking sector. It is high time for banks, financial institutions, payment providers, and others to stop the flow of money laundering and other financial crimes.

This can happen by integrating identity verification and identity screening technologies into the KYC workflow. With a secure digital-first approach, it is possible for banks to digitally onboard customers from all over the world. While ensuring security and enhancing a positive customer experience.

Measures for Enhanced Due Diligence

Let’s say there’s a client that needs EDD verification, what will you do? Instead of going through the process without proper knowledge, you can take some measures. A lot of financial institutions follow de-risking strategies, but that’s too much hassle for legit companies.

The FATF recommends following a risk-based approach for high-risk customers. In a risk-based approach, the amount of information required increases when the level of risk associated with the business increases.

The risk-based approach offers several other advantages for financial institutions. Entities can scale it up or down based on the size and scale of the business. It is highly flexible and can adapt to changing conditions, technology, and other factors.

According to FATF, financial institutions must follow some particular steps while conducting EDD, such as:

Institutions should try to gather as much information as possible about a customer. They should use this information to build an ideal risk assessment profile.
Should conduct additional searches to get more information about individual customer risk assessment.
Should build a thorough report on the customer or beneficial owner to better understand the level of risk involved. It is possible that the beneficial owner is part of criminal activities.
Institutions should build a number of questions that help them collect additional information about the customer. The questions should also try and uncover the intended nature of the business relationships.

Also, it’s not enough to run checks just once, EDD is an ongoing process. To make sure banks stay on top of all the risky activities, they need to keep track of high-risk customer activities.

Requirements for Beneficial Owner EDD

To make sure that you’re covering all the bases, you need to verify the identity of the beneficial owner. Often, institutions forget or neglect the need to verify the beneficial owner. This can put them at greater risk of financial crime.

UBO verification is slowly becoming a vital part of EDD. If an account holder does some international transactions, institutions need to know the beneficial owners of the other account holder. This is to comply with the OFAC (Office of Foreign Assets Control). The OFAC requires banks to conduct due diligence of international accounts at the time of transaction.

Due to the FCPA ACT, an institution has to identify the owner of all the third-party intermediaries. A company can’t comply with regulations properly until they thoroughly check the beneficial owner information.

The 4AMLD states that all the member states have to ensure that all the entities are incorporated within their territory according to national law. They need to collect all the vital information about the beneficial ownership alongside all the basic information about the entity itself.

In the US, there are similar beneficial ownership disclosures that are a part of the FinCEN Customer Due Diligence Final Rule. As per the FinCEN Guidance FIN-2016-G003, “the CDD Rule outlines explicit customer due diligence requirements and imposes a new requirement for these financial institutions to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions.”

The FATF did an analysis of the beneficial ownership best practices, and they concluded that the challenges with tracing UBO information while dealing with foreign ownership or directorships suggest the requirement for enhanced measures for these entities.

Procedure for Ultimate Beneficial Ownership Verification

Up until a couple of years ago, verifying beneficial ownership was a challenging and cumbersome process. It included a lot of manual work which led to mistakes. Business entities had to submit official documents to financial institutions.

Businesses that had to go through additional due diligence have to provide other documents based on their level of risk.

Some common examples include:

Official company documents from the official registry to verify information submitted by the account holders.
UBO identification and verification.
Performing KYC checks on ultimate beneficial owners.

With the help of DIRO’s ultimate beneficial ownership verification, financial institutions can now say goodbye to old manual methods.

DIRO can instantly verify incorporation documents with automated user consent in over 195 countries. It helps in eliminating fraud in merchant onboarding and complying with vendor due diligence rules. Moreover, banks can use it for UBO identity verification and cut down on the risk of UBO fraud.

Conclusion – Growing Need for EDD

Changing regulations and policies are increasing the need for enhanced due diligence. As the scope and need for due diligence requirements are growing, the need for technologies that can handle these requirements is also growing. DIRO document verification and KYC verification solution can help institutions stay on top of these changing requirements with instant and accurate document verification.

Tags edd enhanced due diligence, enhanced due diligence, enhanced due diligence checklist, enhanced due diligence form bank, enhanced due diligence requirements, what is enhanced due diligence