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

ai-based document verification

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

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

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

What’s the Need for Verifying Customer Documents?

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

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

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

Difference Between Modern and Traditional Document Verification

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

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

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

Regulations and Compliances Necessary to Fight ID Fraud

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

Types of Document Fraud

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

  1. Modified Documents

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

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

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

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

How Does Digital Certificate Authentication Work?

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

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

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

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

What are the Fraud Detection Techniques Used by Software?

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

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

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

Benefits of Using an AI-Based Document Verification

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

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

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

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

Final Take: Importance of AI-Based Document Verification Solutions

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

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

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

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

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Bank

Open Banking Recurring Payments and Innovation

Open Banking Recurring Payments

Compare the current financial service market to the one a decade ago and you’ll see enormous changes. It’s all because of technology. When the concept of open banking was introduced in 2019, it opened the floodgates for innovation in the industry. The financial data of consumers were now open to be accessed by any authorized financial service provider and consumers themselves had more control over their data. As banks in the UK were required to let consumers share their transaction data with authorized third-party providers, the era of innovation began. For the first time, consumers were able to explore a range of alternative financial services and payment options from technologically forward FinTechs and financial institutions. 

Open banking has become fairly mainstream in the financial services industry today as more and more customers are becoming technologically demanding. It’s fair for customers to demand instant, intuitive, and convenient digital solutions that can meet their demands, both for personal and professional use. 

FinTech-based open banking innovations have changed the way customers and businesses send and receive payments. They’ve changed the way payments happen, be it one-time or recurring payments.

The open banking recurring payment is the next step toward simplifying the online payments initiative. This provides an innovative and seamless method of the transaction on a regular basis.

History of Recurring Payments

For years, the only way to collect regular payments such as mortgages, rent, and utility bills were “Standing Orders and Direct Debits.” These two methods were the leaders of the industry but they came with their fair share of limitations. Both the methods are prone to errors as customers have to manually enter their bank data. There’s also a high rate of drop-off or abandonment during the payment process because the customers have to leave the ecosystem to set up the instructions. 

All thanks to the rise of subscription-based services, banks and eCommerce companies save a customer’s payment credentials on a file, combined with other necessary information to authorize a recurring payment. While this process seems better than Standing Orders and Direct Debits, it also leads to a poor and error-prone customer experience during set-up as customers have to manually enter the debit or credit card details.

For businesses on the receiving end, debit and credit card payments aren’t ideal. They’re expensive as businesses have to pay a percentage of the value on each transaction. With millions of payments, this can end up being a huge loss in revenue for businesses. Businesses also need to keep reminding customers to update their debit and credit card information in case of expiry. Payments can take up to 3 business days to reflect into the recipient’s account and that’s why it is essential to have a seamless recurring payments method.

Open Banking Recurring Payments: A New Era

Fortunately, open banking recurring payments are opening up new avenues for recurring payment services. It has allowed for a new method of online payments using “Open Banking APIs.” payment initiation or open banking payments are an instant, cost-effective alternative to accepting card payments and bank transfers. 

Operating separately from traditional banking card payments, payment initiations enable businesses to redirect end-users directly to their bank or building society so they can make payments seamlessly.

With open banking payment initiations, customers only have 3 steps to follow:

  • Customers have to choose their bank on the merchant’s page
  • Customers are then redirected to their banking app and authorize the payment
  • They’re then directed back to the merchant’s payment completion page.

Customers don’t have to go through the hassle of finding their cards or manually entering debit or credit card details or account numbers. Open Banking Payments offer a customer more control over their finances compared to direct debits, enabling the transfer of money to a third-party account.

Power to Innovate

For businesses that work on a recurring or subscription-based model, and need better solutions, this exciting iteration of open banking payment initiation promises to accelerate innovation in payment experiences and promotes the creation of new types of financial products and services for the customers.

With their wide applicability, Open Banking Recurring Payments will help businesses from all sectors streamline their long-term relationships all the while providing customers with innovative experiences.

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Fraud

Best Practices and Strategies for Fraud Prevention

best practices for fraud prevention

With global fraud rising beyond control, it’s vital that organizations implement effective fraud prevention policies and procedures that provide security while ensuring a quality customer experience. With the best practices for fraud prevention, businesses can onboard customers quickly and seamlessly.

In the year 2019, the loss because of identity fraud in the U.S was estimated at $16.9 billion. There are more than 40 types of fraud, and businesses need to figure out which type of fraud can affect their business the most and build strategies for fraud prevention accordingly.

The threat of cybercrime is increasing, with the annual cost to the global economy from cybercrime estimated to reach $6 trillion by 2021. Countless online threats pose a significant risk of fraud for businesses. Cybercrime can also break down the internal compliance process, or it can weaken control systems that can detect illicit activities. Top fraud prevention and detection strategies can even help in picking out the best fraud prevention technologies. 

Understanding the threats and the tactics used by fraudsters to create new fraud opportunities is important for the development of the best practices for fraud prevention.

Types of Online Fraud

Fraud detection is a huge problem for businesses because fraudsters are constantly innovating to keep tricking businesses. To keep up, strategies for fraud protection must also innovate to stay one step ahead.

Below are just some of the most common online fraud schemes that organizations should consider as part of their fraud prevention strategies.

1. New Account Fraud

New account fraud usually happens within 90 days of opening a new account. New account fraud is often referred to as application fraud or account origination fraud. As fraud happens so close to when the account was opened, the main purpose of the account was to commit fraud such as money laundering.

For businesses, new account fraud can be extremely dangerous as there’s no history with an existing business and no history of trust. The initial activities in the account may be small but they are often to cover future acts of fraud.

2. Card-Not-Present Fraud 

With the financial industry moving towards digital transformation, card-not-present fraud is something businesses would want to keep track of. There are huge risks of CNP fraud and the merchant is liable for any of the costs incurred during the fraud. 

To mitigate CNP fraud, businesses need effective fraud prevention strategies. By understanding the techniques that fraudsters use and the techniques available, you can develop and operate tactics that mitigate costs while being consumer-friendly.

Businesses should only rely on merchants that meet the Payment Card Industry Data Security Standard (PCI). The PCI is an industry-standard for payment organizations to develop standards for payment data security.

3. Identity Fraud

Identity fraud is when a person assumes the identity of another person without authorization to deceive or defraud someone. 

With most of our lives going digital, fraudsters have no limit to the means of acquiring personally identifiable information (PII). Also, the constant rise in data breaches is making it easier for fraudsters to acquire information that they can use to assume identities. 

The data stolen from data breaches can be brought for as low as $4 on the dark web. In upcoming years, the risk of ID fraud will grow even bigger for businesses with synthetic identity fraud.

Synthetic identity fraud (SIF) is a new and more dangerous type of ID fraud where fraudsters combine real PII with some fake ID data to create a completely new identity. One example of what comprises a fake identity is one that contains a real social security number along with fake addresses and other synthetic data points. Fraudsters can then use synthetic identities to get a driving license, credit cards, open bank accounts, and so on.

Managing FinTech Fraud: Bank-FinTech Partnerships for Better Fraud Prevention

Banks have to fight fraud from all directions and recently the situation is worsening. When a bank partners with a FinTech in a Banking-as-a-Service (BaaS) model, it mitigates risks by placing the responsibility for fraud losses onto FinTech. However, since the economics of the bank and FinTech are linked, it is in the bank’s interest to ensure that controls are in place to help FinTech partners fight fraud while protecting the bottom line.

Additionally, most frauds are financial fraud that requires assessment and sending of suspicious activity reports to the relevant regulatory bodies. This is the reason banks have to be extremely careful while choosing a FinTech to partner with. In this article, we’ll be outlining the risk a FinTech faces while detecting fraud and is there any reason how FinTechs can work together to protect their businesses.

Common Risks to FinTechs

In 2020, the number of fraud cases in that financial sector surged as more people went online for their banking needs. According to industry reports, over $1 trillion was lost globally to cybercrime in 2020. Fraudsters recently have been focusing on the FinTech industry. FinTechs are slowly changing the industry tides by developing cutting-edge technologies to detect and prevent fraud. FinTechs are extremely attractive to consumers, because of the digital environment, low entry bar, mobile-first security and so much more. These are the same reasons why FinTechs are extremely attractive fraudsters within days of launch. 

FinTechs that offer financial services will have to prepare for fraud and will struggle to survive with precious capital to cover the losses. FinTechs with traditional fraud prevention methods like CDD is vulnerable to attack. As FinTechs become a vital part of the financial industry, the risks will keep growing as consumers become more and more familiar with online banking.

Type of Fraud FinTechs Go Through

With the wave of digital transformation, online fraud has grown more than anything. The most common types of fraud include phishing, synthetic ID fraud, online account takeover fraud, and digital transaction fraud. 

1. Phishing

Phishing scams are extremely common, they rely on tricking individuals by unknowingly volunteering personal details or information that can then be used for creating fake bank accounts, and credit cards. Fraudsters who carry out phishing scams build a fraudulent website, a fake text impersonating a government or private entity.

2. Synthetic ID Fraud

Synthetic ID fraud is one of the biggest challenges for financial institutions as of now. To commit synthetic ID fraud, fraudsters combine real “personally identifiable information” and fake information to combine a whole new identity. Such as a legitimate social security number from people who don’t use their credit (child, homeless people, deceased individuals, or someone else), combining that real information with a fake address, phone number, or fake social media accounts. Then this synthetic ID is used to open bank accounts, apply for credit cards and commit more illegal activities.

The first request is obviously denied, but the first application puts that fake identity into the credit reporting system, legitimizing the fake identity. The fraudsters will keep applying for credit cards, switching markets and providers with less mature identity verification processes until the fraudster finally get their hands on credit cards. 

3. Account Takeover Fraud

One of the biggest challenges faced by FinTechs is Account Takeover Fraud, it costs the whole industry billions per year. Account takeover fraud and account opening fraud cause the most problems. More than 50% of businesses reported higher losses due to account opening and account takeover compared to any other type of fraud. 

Account takeover fraud is a situation where a fraudster takes control of a legit business account that belongs to someone else. Account opening fraud on the other hand happens whenever a fraudster opens a new account using a fake, stolen, or synthetic ID. 

4. Transaction Fraud

Transaction fraud is another common type of fraud where a stolen payment card is used to complete an illegal transaction. Since FinTechs are pretty good at completing real-time transactions, they are also at risk of running into transactional fraud. Quicker transaction times are one of the major factors that fraudsters look for in committing transactional fraud.

Transaction fraud can happen at any given time during a financial relationship. Account creation, login, and wherever money flows in and out of FinTech’s systems such as deposits, payments to merchants, withdrawals, etc.

Implementing Anti-Fraud Technologies During Account Creation

The steps for detecting and eliminating fraud should happen during all stages of a customer-business relationship. Businesses and financial institutions need to prevent bad actors from entering their systems, which can help significantly reduce fraud. 

To build the perfect anti-fraud technology & strategies to reduce fraud, businesses must use a combination of identity verification and authentication methods to deliver the ideal level of risk protection. Here are some of the most common fraud-prevention methods:

1. Identity Verification

Before a new account is opened, Identity verification technologies and procedures can detect potential fraudsters and prevent future damages. Anomalies in a person’s identity documents such as out-of-date information, mismatched data, and even the smallest red flags demand further examination. By cross-referencing multiple data points and data sources for ID checks, financial institutions can create stronger barriers for fraudsters.

While ID verification is extremely important, it shouldn’t create friction for legitimate customers. Finding the balance between a secure ID verification process and a positive customer experience is something financial institutions have to do. 

2. Biometric Authentication

Biometric authentication is another huge part of fraud detection and prevention for financial institutions. Biometric authentication authenticates a person by distinguishing biological traits to uniquely identify a person. Combining online document verification with biometric authentication provides multi-fold authentication for financial institutions. If done properly, this can help eliminate fraud while successfully maintaining a positive customer experience. 

3. MobileID Checks

Smartphones can help financial institutions prevent fraud by collecting a significant amount of ID data, including name, mobile number, address, and device information. To make a proper image of customer identity, this data can be cross-referenced with other ID data points. Mobile ID data can help financial institutions authenticate the individual, and the data collected can also help in finding potential future risks.

Collaborating With Banks for Better Fraud Prevention

As the fraudulent landscape becomes increasingly more complex, it becomes tough for banks and FinTechs to detect suspicious transactions and prevent illegal activities. Fraud prevention solutions that leverage data learning and machine learning can help FinTechs better safeguard themselves and detect fraudulent actions. 

By collaborating with banks, FinTechs can take a better approach to financial fraud prevention. Banks can bring their expertise in complying with ever-changing KYC, KYB, and AML regulations. Whereas, FinTechs can play their part and bring in the much-needed technological expertise. Financial technologies such as online document verification software and online bank account verification software and proof of address verification software tend to enhance the overall fraud detection and prevention programs. With a proper collaborative approach, FinTechs and banks (or other financial institutions) can fulfill the need for digital transformation, while ensuring a positive customer experience and preventing fraud.

Fraud Prevention Technologies for Financial Institutions

Businesses can build as many best practices for fraud prevention as they want, but without the help of the right technologies, fraudsters will find a way to sneak into the systems. By integrating technologies into the fraud prevention workflow, financial institutions can eliminate most of the major risks of fraud. 

DIRO’s online document verification service helps businesses with proof of address verification, bank account ownership verification and so much more to eliminate fraud. DIRO verifies over 7,000 document types from all over the globe instantly and provides stronger proof of authentication. By integrating DIRO into the workflow, businesses can successfully comply with AML and KYC regulations while ensuring a positive customer experience.

Categories
Finance

Financial API Integration

Financial API Integration

Over the last decade, a new financial landscape has come into existence using APIs. This ecosystem is interconnected, and open, and leads to building an array of new financial services that offer people more freedom to handle their finances. In this guide, we’ll walk you through what financial API integrations are and how they work. Also, how financial API integrations help both businesses and consumers.

Understanding Financial API Integrations

Application programming interfaces (APIs) are a set of tools and protocols that allow software programs to communicate with each other. API integration helps in connecting two or more applications together and allows for seamless exchange of data. 

Financial APIs are most often made to integrate a bank’s and financial institution’s core banking platform with third-party data networks and applications. This allows for safe and secure consumer-consented third-party access to essential account information such as account and routing numbers, balances, and transactional history. These financial API integrations allow these trusted third parties, be it FinTechs, mortgage, and auto lenders, or any other financial institutions, to build data-driven financial solutions.

How does Financial API Integration Work?

Based on how they’re used, financial API integrations can serve several roles, such as:

1. Partner API (One-to-One)

When financial API integrations are built directly to work between a financial institution and a financial app or service they’re known as partner APIs. These types of APIs are built when a financial institution uses a third-party vendor that builds a FinTech solution for them. These solutions are perfect for customers of a single institution, instead of being available to the general public.

2. Open API (Many-to-Many)

Open banking APIs are usually built by data networks, rather than by financial institutions or by a third-party vendor. By building API integrations with several financial institutions, the data network creates an open API that can connect several financial institutions for many FinTechs and services. 

In this situation, a FinTech app wants to allow customers from several financial institutions to connect their accounts to the app. The work of building API connections to each financial institution is carried out by a data network.

The term Open Finance comes from open banking APIs. In the open finance ecosystem, consumers have complete control over their financial data, and by letting third-party access consumer data, consumers can gain access to personalized services.

Types of API Integrations

There’s no limit on the type of APIs and the role they serve for businesses and consumers. Below, we have mentioned some of the most useful APIs that have been changing the financial landscape:

1. Account Verification

Account takeover fraud has become a common instance in recent times. Financial institutions have no way to verify if a consumer who’s trying to access a new FinTech app or service is legit or not. The new account that’s being created needs to be verified. This is the first step toward funding a new account on a trading app or connecting a bank account to a P2P payments platform.

The account verification process then verifies if the person using the account actually owns the account. This is crucial for preventing account takeover fraud. DIRO’s bank account verification fraud helps banks and FinTechs in verifying if an account is being used by the legit owner or not.

2. Balance

Once consumers authenticate their accounts, they can grant permission to different types of account data to digital financial tools that they want to use. One of these data is the account balance, by verifying a user has enough funds in their account, FinTechs can prevent users from going into a loss by making a transaction over their account balance. 

Balance-checking APIs also offer pre-funding, and if a new customer wants to add money to the FinTech app, the API will check if the person has enough balance in your account to handle the cost. Thus saving the consumer from the risk of non-sufficient fees. 

3. Transactions

A transaction API allows a bank, financial institution, or FinTechs to access a customer’s transaction data going from the past couple of months and years. This crucial data is vital for making personalized financial services possible. 

4. Account Aggregation

Most consumers have several accounts for checking, savings, loans, investments, credit cards, and more. It can get hard for users to manage all this data, so account aggregation APIs create a dashboard for users to manage their data in one place. 

Let’s say someone wants to access their entire investment portfolio in one place and show changes made in real-time. API integration between their investment accounts and a FinTech app could offer a solution.

An API integration that can automatically connect all the information and share it with the lender during the application process can greatly reduce manual efforts.

Benefits of API Integrations

Financial API integrations make it possible to fill the gaps left by basic banking services. This leaves room for private companies to create personalized financial services with ease. These services help in making several processes faster, more efficient, and more secure for consumers. 

The benefits of financial APIs can be broken down into 4 groups such as:

  • Financial institutions
  • FinTech companies
  • Consumers
  • Non-financial businesses

Need for a Connected Ecosystem

Financial APIs are becoming more and more essential for financial institutions, FinTechs, and consumers. Financial APIs allow for new possibilities that financial institutions and FinTech apps alone couldn’t provide. 

Categories
Finance

Information about New Indian Digital Currency

Indian digital rupee

If you don’t know already, the Digital Rupee is India’s own regulated cryptocurrency that will be soon launched by the RBI. On February 1, while announcing the annual budget for 2022-23, Union Finance Minister “Nirmala Sitharaman” announced to the whole country that RBI will be launching an Indian digital currency in the financial year 2022-23. The currency will be called “Digital Rupee” and will be based on blockchain technology. Digital Rupee will be the rival for other cryptocurrencies such as Bitcoin, Ethereum, and more. There’s a lot of speculation about the Indian Digital Rupee. 

During the budget announcement, the finance minister said that India’s digital currency will be launched by the Reserve Bank of India (RBI). She also stated that the Indian rupee digital currency will be a cheaper and more efficient method of sending and receiving money throughout the country. The launch of the new Indian digital currency is already under work with RBI making sure every step is followed through carefully. The RBI is working on an implementation strategy that makes sure that every part of the general populace has access to the currency while ensuring the safety of the users. As of now, there’s no set/fixed Indian digital currency launch date.  

The Digital Rupee can help the country lessen the usage of the older cash system.

Indian Digital Rupee: Coming This Year?

New Indian digital currency will operate on the well-known blockchain technology, which is the basis for all the other cryptocurrencies globally. There’s no news on whether or not users will be able to mine the currency, if yes, will it be considered legal?

India isn’t the first country to launch its own cryptocurrency. Before the Indian rupee digital currency, China already started and tested its cryptocurrency in several cities. The US and UK governments have also been considering starting their own cryptocurrency. 

While the government hasn’t proposed any bills on crypto, the two primary regulatory clarifications from the finance minister have made it clear that digital currency is a growing industry. As RBI will be launching the cryptocurrency, there will be some heavy regulations surrounding the currency, ensuring safety, efficiency, and fair transactions. Plus, as RBI will be entering the blockchain scene, it suggests that governments are seeing the benefits of blockchain technology and how it can help the consumers. 

Although, the hefty 30% tax on crypto transfer gains is sure to halt the new users entering the space. From here on, we can only wait and see where this Digital Rupee idea proposed by the Indian Government will head to.

What is CBDC in India?

Central Bank Digital Currency is what CBDC stands for. CBDC is the legal tender issued by a central bank in digital form, it’s the same as a fiat currency and is exchangeable one-to-one with fiat currency. The only difference between the two is their form.

What’s the Difference Between CBD & Cryptocurrency?

CBDC is a digital or virtual currency, but it’s not similar to other private currencies that have gained popularity over the last decade. As per the RBI, virtual currencies aren’t as useful as traditional money as they aren’t commodities and they have no intrinsic value. Whereas a CBDC is centralized, cryptocurrencies are decentralized and don’t represent the finances of a particular person or entity. 

The CBDC can also reduce transaction demand for bank deposits, but they reduce settlement risks, being-risk free, CBDC can lead to a shift from traditional banking services. If banks lose deposits, their ability to create credit will be limited and central banks can’t provide credit to the private sector. 

What’s the Need for CBDC in India?

There’s been a slow yet accelerating shift of digital payments combined with an all-time low interest in cash usage, especially for small value transactions. While CBDC is highly unlikely to replace the use of cash, the currency to GDP ratio, if switched to CBDC, would cut the cost of printing, transporting, storing, and distribution of physical currency.

Future Plans by RBI

The RBI has been figuring out the use cases and building an implementation strategy for introducing the CBDC with almost zero disruption to the cash-only economy. According to the Central Bank, several crucial elements need to be designed and tested before the digital rupee in the form of CBDC can be introduced. The RBI is working out implementation models and strategies, and use cases of the digital currency.

When’s the Expected Launch of Digital Rupee?

Even if the RBI is ready to launch the Digital Rupee for everyone, it’s impossible before the crypto law is passed and approved in Parliament. Some changes will be required in the RBI Act as well before the digital rupee is launched in India. Some of the most crucial changes in the RBI Act are:

  • Coinage Act
  • FEMA
  • Information Technology Act

Without the crypto bill, and small changes in the RBI Act, there’s no way that the Indian digital rupee is launched in the country. 

Categories
KYC/KYB

Customer Due Diligence

customer due diligence

Security should be the first and foremost priority of financial institutions and banks. You wouldn’t want to provide access to financial systems to fraudsters of any kind? It makes sense for banks and financial services institutions to vet their customers and potential customers thoroughly. Verifying customers before giving them access to financial services is crucial. This is needed to prevent money laundering, embezzlement, account takeover fraud, and all types of fraud. And this is why customer due diligence is an important part of onboarding new customers.

In this guide, we’ll walk you through what is customer due diligence and what it means for banks and other financial institutions.

What Is Customer Due Diligence?

Customer Due Diligence (CDD) is the process of identifying your customers and checking if they are who they claim to be. Organizations need to properly risk-assess customers and give them a risk profile before onboarding them. To achieve CDD, businesses need to obtain a customer’s details and cross-reference them with those of an official document that confirms their identity.

CDD is a regulatory requirement for banks, financial institutions, and other businesses starting a relationship with a new customer. The purpose of this is to prevent financial crime and prevent potential crimes that can happen by doing business with highly risky customers.

In customer due diligence, FIs have to analyze customer information from several sources, including the customer sanction lists as well as public and private data sources. The amount of information you collect depends on the risk profile of your customers. Basic customer due diligence requires the following:

  • Information about the identity of your customers, including their name, address, and a photograph of an official ID document.
  • An overview of your customer’s activities and the markets they do business in
  • Basic understanding of other entities that your customers do business with

Customer Due Diligence is at the foundation of Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance. CDD is aimed to help financial institutions verify their customers, confirm they’re not on any sanctioned lists, and assess the risk factors.

Customer Due Diligence Practice for Banks

Financial institutions have to build and follow a risk-based strategy to comply with customer due diligence as part of KYC and other regulations. This helps make sure that the organizations remain compliant with basic regulatory laws and regulations of the markets in which they operate. 

The level of CDD in banking depends on the type of business-customer relationship and the customer’s risk profile. In a broader sense, banks need to take the necessary steps to make sure that a customer is who they claim to be. This can help in preventing fraudulent activities such as identity fraud or impersonation.

What Does a Customer Due Diligence Process Look Like?

An effective customer due diligence process includes collecting a series of detailed customer information before initiating a customer-business relationship. But that’s not all, a customer due diligence process is operational long after the customer is part of a business.

Here are the requirements for a robust customer due diligence process.

  • Customer Information: To make sure that customers are who they claim to be, businesses need to collect customers’ basic information. This basic information is the full name, photo identification, address, phone number, email address, occupation, tax identification, and more. 
  • Business Information: CDD processes should have additional information regarding a customer’s business model, source of funds, and UBO.
  • Customer Risk Profile: Another crucial part of customer due diligence is building a risk profile for every customer. This risk profile is made by collecting information such as location, business type, and customer identity. Based on this information, a risk profile is built (low, medium, high), which is to show the level of money laundering risk they pose. A customer’s risk profile determines how much due diligence is needed for a customer. High-risk customers need more detailed diligence compared to low and medium-risk customers.
  • Continuous Monitoring: The customer due diligence process doesn’t stop after customer onboarding by a bank/financial services industry. An ideal CDD measure should include some kind of ongoing monitoring system and keep an eye on high-risk clients, suspicious transactions, sudden changes to customer profiles, and so on. 

Your customer due diligence process should answer all the fundamental questions:

  • Is the applicant the person claiming online?
  • Does the risk profile of the applicant raise any red flags?

Low-risk customers can be fast-tracked through the approval process. All because of the online customer verification software and online bank account verification software. Because of automation, customer verification has become 40% more streamlined. This means that the customer onboarding process for low-risk customers should be cut down to under 2 hours.

However, the decision time for higher-risk individuals may still take longer. Most of the time it takes around 48-72 hours to onboard high-risk customers. Assuming that 90% of the customers will be low to medium-risk customers, the cost and efficiency gains of automated ID verification and AML screening can reduce the costs dramatically and improve user experience.

Streamlining Customer Due Diligence Process

Complying with KYC and AML requirements has made the account opening process complex and time-consuming for most businesses. Different banks take different amounts of time for onboarding new customers. But, on average a bank takes 24 days to complete the customer onboarding process. And with a growing number of regulations, it’s only going to get worse. 

Moreover, increased onboarding time and friction will cause higher abandonment rates by customers. These costs can exceed the costs of any type of fraud considering the lifetime value of lost customers. 

This is why it’s high time businesses need to streamline the CDD process to save money and get new customers.

1. Identity Verification

While there are a series of other ID verification methods, more and more businesses are now relying on automated identity verification to smooth out the onboarding process. Automated ID verification relies on AI, machine learning, and biometric verification to authenticate identity documents. In some cases, banks may even ask customers to perform a liveness check to ensure that the applicant is physically present instead of customers using a pre-recorded video.

2. Ongoing Monitoring & Screening

Not just ID verification, AI and machine learning software can easily provide financial institutions with a more effective transaction monitoring system. This reduces the risk of false positives for suspicious activity.

Same as building risk profiles, individual transactions can also be scored and combined with advanced algorithms that track expected vs actual transaction behavior and update customer risk ratings in real-time. 

Better ID verification, AML screening, and transaction monitoring solutions are enabling financial institutions to keep up with the changes made by regulatory bodies. These technological solutions can help financial services institutions to spot patterns and suspicious transactions by monitoring current transaction data and comparing them with historical transaction data.

Importance of CDD

When you consider the amount of harm fraudulent activities can do, it makes sense the amount financial institutions spend on complying with KYC and AML compliance. These countermeasures are designed to prevent money laundering and other financial frauds.

Here are the main reasons why banks need to take CDD seriously:

  • Big compliance fines: The enforcement of AML regulations is on the rise, since 2009, regulators have levied over $32 billion in AML non-compliance fines. In 2020 itself, FinCEN fined banks in the United States for over $11.11 billion.
  • Sophisticated Cyber Crimes: Criminal are using more sophisticated methods to remain undetected, including globally coordinated tech, insider information, the dark web, and e-commerce.
  • Reputational Risk: AML non-compliance puts financial institutions’ reputations on the line. The average value of the top 10 banks is $45 billion. 
  • Rising Costs: Most AML compliance activities require a huge manual effort, making them inefficient and difficult to scale.

Enlightened Approach to CDD

A growing number of banks and FinTechs are discovering how to automate their CDD process and if needed the enhanced due diligence process. By using the latest tools and technologies such as online document verification and online KYC verification software, businesses can improve the customer due diligence process.

When is CDD Necessary in Banking?

  • Starting a Business Relationship: Before starting a new customer-business relationship, banks have to perform due diligence checks, verify who the customers and ensure that they aren’t using a fake identity. 
  • Occasional Transactions: Certain transactions may require you to follow CDD strategies. For example, transactions over a certain monetary amount (over USD 10,000) or if the customer is transacting with high-risk persons or regions.
  • Suspicious Activity: Banks have to implement CDD checks if the customers have a suspicious history and shady activity related to money laundering or financing terrorism.

Unreliable Identification: If the information offered by your customer is unreliable, suspicious, or doesn’t meet requirements, banks should implement additional CDD measures. 

Reducing Customer Due Diligence Time: How to Go From Weeks to Minutes?

The regulations made for saving customers and businesses from fraud are diverse and institutions have to keep pace with developing strategies to remain compliant. As such, creating a smooth onboarding process that is robust and efficient isn’t a mean feat. The biggest challenge in staying compliant is for businesses to keep evolving requirements while reducing friction and delays. A process full of friction and delays lead to increased poor customer frustration and drop-offs. 

When onboarding new customers, financial institutions need to know who they are dealing with before getting into a full-fledged business relationship. To verify customer identities, due diligence is important.

Customer due diligence is an important part of your business’s risk management. Different customers have different levels of risk, so CDD is conducted based on risk level. You should assess the potential risk level of each customer, and adjust your due diligence strategy. For the majority of clientele, standard due diligence practices that just require the authentication of customer identities will suffice.

In certain lower-risk scenarios, simplified due diligence is enough. When carrying out simplified due diligence, you just need to identify your customers instead of identifying and verifying them.

On the other hand, there might be instances where standard due diligence isn’t enough, in this case, you’d need to adopt an enhanced due diligence process.

Let’s break down 3 different levels of customer due diligence:

  1. Simplified Due Diligence (SDD): Simplified Due Diligence is used in situations where the risk of money laundering or terrorist funding is minimal and CDD isn’t important. SDD happens in accounts that have low transactional value, the risk of illegal activities is minimal at best.
  2. Customer Due Diligence (CDD): This type of diligence happens when information is obtained on customers to verify their identity and assess the risk profile of customers. These types of diligence checks are done on customers when opening a financial account in some form.
  3. Enhanced Due Diligence (EDD): EDD is done for customers to assess the identities of high-risk customers and monitor their transactional history to mitigate the chances of future risks. Most jurisdictions need politically exposed people lists (PEPs) to go through the EDD process. Other factors that require EDD for a customer are high transaction/value accounts, accounts that deal with high-risk countries, or accounts that deal with high-risk activities.
  4. Due diligence is vital for mitigating fraud, not only to comply with regulations and avoid hefty fines, but it is also a smart business strategy. Not knowing your customer identity is a risk factor for most businesses. 

International standards require a risk-based approach to be added to the customer due diligence. Companies have to assess the money laundering risks each customer poses and adjust their due diligence checks. 

Customer Due Diligence Checklist

1. Conduct Basic Customer Due Diligence

The first step is to conduct a simple investigation, such as identifying and verifying a customer’s identity. Businesses are needed to verify the identity of the customers they’re dealing with. These requirements apply to all new customers as part of Know Your Customer regulations. 

There are multiple methods businesses can verify customer identities. The first step is online document verification, which involves assessing the legitimacy of a customer’s identity document.

In addition to online ID verification, businesses should also look forward to verifying customers’ financial information and their business activities. 

2. Take Help from Third Parties

Most of the time, businesses will opt to work with third-party solution providers while conducting customer due diligence. Third-party solution providers can be auditors and providers of CDD solutions such as online document verification. Businesses need to make sure that any third parties they work with are reliable and are trusted enough to share confidential data.

3. Figure Out if EDD is Needed

If the customer is considered as high-risk, the businesses may need to go beyond ordinary customer due diligence. Enhanced due diligence is necessary if you’re entering into a business relationship with a politically exposed person (PEP), and if the transaction involves a person from a high-risk country. 

4. Keep a Thorough Record

A bank/financial institution is forced by law to keep a record of all financial transactions for at least 5 years. This includes any information collected through CDD measures, account files, and any related analysis.

Businesses also have to securely document and store all the information, as this information contains sensitive information, and it would be challenging if the information was lost.

5. Keep Up-to-Date Records

It’s vital for businesses to keep records of their customers. If any changes happen regarding your customers, you’ll need to redo their risk assessment and carry out further due diligence if it’s required.

Speeding Up the Process

Regulated businesses have to apply risk-based customer due diligence measures to prevent their businesses from getting threatened by money laundering or terrorist financiers. To avoid these financial frauds, KYC & AML checks have to be completed. With proper due diligence checks, businesses can reduce the financial, reputational, regulatory, and strategic risks of other entities.

Traditionally, businesses perform due diligence checks using manual paper-based processes. Manual work requires a human, and it takes up a lot of time, the process is full of errors and offers no visibility to the customers. The manual process usually is frustrating, and time-consuming. That’s why integrating new technologies into the CDD process is always a good idea.

How does DIRO Help?

DIRO’s online document verification software offers instantaneous document verification that can easily strengthen the KYC & AML process. DIRO offers stronger proof of authentication with verifiable credentials. With DIRO being able to verify over 7000 document types from all over the globe, it can strengthen the AML and KYC verification process.

Categories
Proof of Address

Proof of Address Guide in US, UK, and Canada

proof of address in us, uk, canada

Moving to a new country? Opening a new bank account is one of the first things that you need to do, as there’s no way to survive without money. To open a new bank account in the US, all you need is a driver’s license or a state-issued photo ID. Opening a bank account, or renting a home requires proof of address verification.

Finding a proof of address document in a new country can be challenging. There are different rules and regulations in each country. Different organizations can also decide which documents will they accept as proof of address verification. Depending on the country you’re in, what counts as address proof varies. However, in the US, UK, and Canada, one or more of  the below-mentioned documents will work:

  • Driver’s license
  • Proof of employment
  • Academic records
  • Bank statements
  • Utility bills
  • Rent arrangements

Utility bills can be of any kind, water bills, electricity bills, internet bills, or phone bills, they can be used separately or together. But for utility bills to be submitted as a proof of address verification document, they have to be less old than 90 days.

In this guide, we’ll be telling you all about the proof of address verification in the US, UK, and Canada.

Why is Proof of Address Verification Required?

Proof of address or proof of residency is a document that’s used to verify where a customer lives. It differs from other types of ID documents that are used for verification, as not all ID and government-issued documents include your current address.

The proof of address documents should show where a person lives. If you don’t have a particular proof of address document, then you can purchase a post office box in the U.S., for receiving mail, but that doesn’t count as a residential address. For account opening and other purposes, you’ll be asked to show an ID proof and 1 proof of address document. Customers can’t use the same document for both proof of ID verification and proof of residency verification. Some organizations may have other policies, but it’s best for customers to carry 2 different documents with them. 

The proof of address verification allows customers to access multiple services and also offers banks and financial institutions a paper trail to keep track of customers. If you’re planning to move to the U.S., U.K., or Canada, then it is essential to prove your residency. If you plan to send money or receive payments, then you’ll need to open a new bank account.

While you’re in a new country, it would be helpful to collect as many proof of address documents as possible. Having multiple documents is important, as different companies have different policies. 

Regardless of what proof of address you use, it’s also important for documents to be fairly recent. The document that you provide should contain your full name and address. If you’re using an address proof that doesn’t have a valid date, then you have to provide the last three recent bills.

Proof of Address Verification in the U.S.

The most common proof of address verification document in the United States is the driver’s license. It’s also the most commonly used ID verification document. The problem for new residents in a country is getting a driver’s license, alongside documents that show proof of identity such as a passport, permanent resident card, birth certificate, and others.

If you want a list of acceptable proof of address verification documents, then you can visit the DMV website for a full list of documents. If you don’t want to go through the website, then here are some of the most commonly accepted articles:

  • Utility bills
  • Rental contract or lease agreement
  • Mortgage statement for homeowners
  • Documents from your school, such as enrollment papers or a report card
  • Insurance policies or premium bills
  • Bank or credit card statements
  • Tax form
  • Posted mails with your name and address

How to Get a Photo ID Card?

While it’s not as commonly used, you can also apply for a photo ID card in the state of the U.S. you live in. This ID document can also be used as a proof of address document when needed. You can apply for a photo ID from a government agency such as the Department of Motor Vehicles (DMV).

To apply for a photo ID in the USA, you need:

  • Your green card, valid Employment Authorization Card with Forms I-8744, or another US Visa with an I-94 form.
  • Social security card
  • Proof of address

Keep in mind that every state has its own rules. Be sure to reach out to your local DMV to learn about the rules and regulations.

Also, non-residents can’t have a social security number. Regardless, you can still get a photo ID from the DMV without an SSN.

Proof of Address Verification in Canada

Same as in the US, your driver’s license is a common proof of address document in Canada. But there are other documents you can use for proof of address verification.

  • T4 slips from your employer
  • Your tax returns
  • Rental agreements or receipts from landlords
  • Government-issued photo ID
  • Utility Bills
  • Car registration
  • Academic records and transcripts
  • Insurance policies
  • Bank or credit card statements
  • Notice of assessment

Documents such as T4 slips, and academic records are the most easily available proof of address documents. Utility bills and lease agreements are the second-best easily available proof of address documents.

Proof of Address Verification in the UK

In the UK, proof of address verification documents are needed at almost every step. Proof of address verification in UK is a crucial step in customer onboarding. Let’s say you want a proof of address document for bank account opening, you’ll need documents such as:

  • A letter from your university, college, or school
  • A letter from your employer confirming your address
  • A letter from someone you know who is a customer of that bank who can act as a verifier for the bank.

In the United States and Canada, you can also use a rental agreement, insurance policy, credit card statements, and utility bills for proof of address verification.

Additional Documents for Proving Address in the UK

Another method for proof of address verification documents is to use a company that helps residents arriving in the country. These companies and service providers can help in streamlining the overall process.

Conclusion: Proof of Address Verification

Chances are, whenever you move to a new country, you’re likely to have at least one document that can be used as proof of address verification.

You may have an employment letter, university transcript, cell phone bill, rental agreement, or others. Once you’ve got a proof of address verification document, you can start opening a new bank account.

Categories
Blockchain

What is Blockchain? How Does It Work in Favor of Business?

blockchain for business

Blockchain for business is invaluable for entities that transact with each other. The distributed ledger technology allows participants to access the same information at any time to improve efficiency, build trust, and remove friction. Blockchain also allows businesses to rapidly scale and perform various tasks across industries. Blockchain for small business offer four main benefits:

  • Consensus: Shared decentralized ledgers are updated only after the transaction is validated by all involved participants.
  • Replication: Once a block (a block of information) is created, it is automatically created across all the ledgers for all participants in that channel. Every involved party in a business can access and share a “trusted reality” of the transactions.
  • Immutability: More blocks can be added to the chain but it is impossible to remove a block, so every transaction can be recorded permanently which increases trust among the stakeholders.
  • Security: Only trusted and authorized parties are allowed to create blocks and access the information and data stored in them. This makes blockchain technology incredibly secure.

How to Implement Blockchain for Business?

Blockchain has left the crypto market and it has gone mainstream. Industries around the world are using blockchain to transform their business operations. Blockchain provides a sense of trust, reliability, and efficiency that wasn’t possible earlier on. With the use of blockchain, businesses can reinvent the supply chain, food distribution, financial services, government data management, retail services and so much more. The benefits of blockchain in business are seemingly endless, the only limitation is implementation.

Innovative Applications of Blockchain for Businesses

Widespread blockchain use for business will change the way your business runs its day-to-day operations. Here are the most common uses of blockchain technology for business:

1. Smart Contracts

The release of the Ethereum project reinvented the word “smart contract.” The project is “a decentralized platform that runs smart contracts, applications that run exactly as programmed without any possibility of downtime, fraud or third-party interference”.

‘Smart Contracts’ are automated computer programs that can carry out the terms of any contract. What makes it even better is that these contracts will be unbreakable. Top companies like Slock, which is an Ethereum-enabled internet-of-things platform, leverage this application to allow customers to rent bicycles where they can unlock a smart lock after both parties agree to the terms of the contract. This is one of the best uses of blockchain for business.

2. Cloud Storage

Cloud storage is another brilliant application of blockchain for small businesses. One of the most innovative brands in the market named Storj claimed that “Simply using excess hard drive space, users could store the traditional cloud 300 times over.” 

The average cost of blockchain regarding cloud storage is more than $20 billion. By integrating blockchain into cloud storage, significantly reduces the cost of storing data for companies and personal users. If that’s not one of the best benefits of blockchain in business then what is?

3. Faster, Cheaper Payments

Blockchain started with Bitcoin, also it shouldn’t come as a surprise that Bitcoin and other cryptocurrencies can be used to initiate faster payments. Making crypto payments on the blockchain is beneficial when you have international or remote workers. Blockchain allows you to pay the salary of your employees in less than an hour without outrageous transaction fees associated with banking systems.

Paying employees by using cryptocurrency may help you save money in numerous ways. Plus, with blockchain, you can keep track of your transactions and payments. This way, you won’t ever overpay on your taxes or underpay. If you’re wondering how to implement blockchain in business, then you should try to move in this direction.

4. Improved Marketing Campaigns

Good marketing is crucial for your business, but the number of businesses that are competing in the space makes it harder for your business to stand out from the crowd. Businesses are usually familiar with using social media, billboards, and other forms of marketing. Blockchain may make your marketing efforts more effective. 

Blockchain can be used by marketers to keep track of client information and consumer behavior. Using this data, skilled marketers can build robust marketing campaigns that provide better ROI. Additionally, blockchain allows marketers to verify that the traffic they’re getting is real people. 

5. Fraud Mitigation

Banks, financial institutions, and other businesses can use blockchain technology for businesses to identify with whom they are working. Blockchain facilitates reliable ID Management to prevent fraud. If customer information is stored on a blockchain network, it mitigates the risk of identity theft, money laundering, financial fraud, and so on.

Any information placed on the blockchain can’t be changed, it allows people to take control of their data. Once a customer’s identity verification has been completed, other parties can use the data to confirm if they are working with a real person and not an identity thief.

Categories
Bank

Identifying Fake Bank Statements: How to Fight Fraudulent Applications

fake bank statement

Prospective tenants, bank account openers, and other bad actors can use fake bank statements to commit a series of illegal activities. While fraudsters are getting smarter, they also utilize technologies to make near-perfect bank statements. Manual verification methods can’t keep up with the standards set up by bad actors. Identifying fake bank statements is the need of the hour to reduce fraud as much as possible. There are some common methods that can be utilized to identify fake bank statements.

How to Fight Fraudulent Applications?

Unfortunately, the problem of fake bank statements is still prominent and it has grown even bigger with the pandemic putting millions of people out of jobs. As a matter of fact, the problem with fake banks has become an even bigger nuisance for banks, financial institutions, building owners, and so on. The percentage of fake bank statement use increased from 15% to 29% in September 2020.

What makes this situation worse is that one in every 4 applications tends to go unnoticed. The increase in the number of undetected fraudulent applications can be allotted to the lack of proper verification solutions. Also, manual methods of verification can’t detect highly sophisticated forged bank statements. Automation and data utilization can be used to fight fraudulent applications.

Identifying Fake Bank Statements

1. Ensure that All The Figures Match Up

One common mistake that fraudsters make is that they don’t put in too much effort to ensure that all the numbers on the bank statements add up. If there is no money for automated verification processes, then you’ll need to take up your time to figure out if the numbers add up.

While identifying the bank statements, it is always a good idea to keep one thing in mind: people who fake bank statements will often use round figures. Proper round figures are usually a red flag while identifying if a bank statement is real or not. 

2. Take to a Bank Rep

If as a business you’re uncertain that you have received a fake or genuine bank statement, then one way to be sure is to reach out to a banking representative. Call the bank yourself, don’t rely on any information that’s listed on the bank statement. Once you get through to a banking representative, confirm all the details you want to confirm. 

In most cases, a banking representative will ask for a mail copy of the document. Chances are that you may not get much support from the bank. Various banks will try to prevent the manipulation of documents by adding some kind of digital signature to the PDF files, although this feature is usually to protect investment accounts. 

3. Search for Inconsistencies and Errors in Documents 

The first potential red flag regarding the bank statements is the major & minor inconsistencies in the documents. Are the font size and the font type consistent with other document types of the same bank? Is the bank’s logo accurate and up to the standard? People who create fake bank documents often get lazy and these inconsistencies can help in preventing online fraud. Do the numbers add up in the document and do the ending balance make sense? Are there any withdrawals that are suspicious? If the bank statements contain any of these inconsistencies, then you may need more research.

4. DIRO’s Online Document Verification

While you can rely on manual methods of verification for a lot of things, they still have some limitations. By utilizing technologies, you can easily distinguish between fake and real documents. DIRO’s bank document verification software verifies documents instantly and provides strong proof of verification backed by verifiable credentials. DIRO’s online document verification tool can verify over 7000 documents from all over the world by cross-referencing document data from an original web source.

The technology can eliminate the barriers of manual verification and enhance the overall document verification process and eliminate document-related fraud. 

Categories
KYC/KYB

Doing Business in Brazil: Here’s All You Need to Know

business in brazil

The times are changing and businesses want to reach global markets. The increasing interactions and transactions with people around the globe. All this is supported by the latest advancement in communications and information technology. The major driving forces behind globalization are “shipping, data, and capital flows”, businesses can use these to their advantage to enter new markets.

Expanding to new markets, leveraging existing technologies, and building a loyal customer base are challenging with great rewards. Banks and financial services institutions offering services to the unbanked and underbanked face several challenges while entering new markets. 

Doing business internationally is difficult compared to operating domestically. Apart from cultural and language barriers, businesses need to comply with multiple regulations that they’re unfamiliar with. So, what does a business consider before trying to do business in other countries? To make the transition to new countries easier, we at DIRO have decided to offer insights on what it takes to enter new markets. In this guide, we’ll be sharing all the information necessary about doing business in Brazil.

Doing Business in Brazil

Brazil has a huge population and it has all the pillars that support a strong digital economy. A large portion of the population is equipped with fast internet connectivity and smartphones. To give you an idea, Brazil has the second-highest number of Facebook and Twitter users. What makes their digital economy even stronger is that it has more smartphones than people.

Most of the population is youthful and is up for new technology adoption. 85% of the population lives in urban areas. When it comes to entrepreneurship, Brazil is one of the top entrepreneurial countries in the world. 

Brazil Stats:

  • Population: 212 million 
  • Median Age: 32
  • GDP: $1.868 trillion
  • GDP growth: 1.8%
  • Income per capita: $12,300
  • Internet access: 70.2%
  • Smartphones: 44%

1. FinTechs

One indicator of Brazil’s financial growth is the number of FinTech companies. In 2019, 380 FinTech companies were successfully running their business in Brazil. The biggest name out of them all is Nubank, as they reported opening 1.5 million digital savings accounts first 6 months of their operations in 2018. Already 64% of the Brazilian population has adopted some type of FinTech.

2. Digital Payments

In 2020, the total transaction value for digital payments was over $50 billion. Combining that with an annual growth rate of 11.8 percent, the value is expected to cross the $75 billion mark in 2023. 

3. mCommerce

As we mentioned above, Brazil has a huge number of smartphone users. With the significant use of smartphones, and the youthful tech-friendly population, the mCommerce industry can grow. 

4. Cybercrime

With the high number of smartphone users, the rate of cybercrime is high in Brazil. 76% of the Brazilian population have reported that they’ve been personally affected by cybercrime. The rate of cybercrime is the highest out of all countries. This may be a major challenge for banks and financial services providers trying to enter the market.

Current Situation of AML/KYC in Brazil

1. Anti-Money Laundering

 Brazil is a member of the FATF and has had AML laws since 1998. Although, the FATF has great concerns about deficiencies identified in its June 2010 mutual evaluation report. While Brazil didn’t implement necessary changes, in 2019 the FATF mentioned its concerns regarding Brazil not being able to keep up with international standards to prevent money laundering and terrorist financing. 

2. Regulators

When it comes to regulatory bodies in Brazil, there are 3 main regulatory bodies. These regulatory bodies are in charge of implementing and amending AML and KYC laws. The bodies are the Central Bank, CVM (Brazilian Securities and Exchange Commission), and Financial Activities Control Council (COAF).

3. RagTech

Regulatory bodies and industry leaders are in favor of innovation in the compliance industry to streamline the process. Using machine learning and artificial intelligence algorithms to improve the compliance process for both customers and businesses is in the works.

4. Data Protection

The Brazilian General Data Protection Law (LGPD) was released in 2018. Brazil’s first data protection regulation is largely aligned with the EU’s GDPS (General Data Protection Act).

Identity Requirements and Systems

 Brazil has two different Identity systems.

  • Registro Geral (RG)
  • Cadastro de Pessoas Físicas (CPF)

The Registro Geral is the official national ID document and it contains a person’s official ID document, containing a person’s name, DOB, parent’s names, signature, thumbprint, and a unique number. Since 2017, the RG cards are machine-readable. 

The Cadastro de Pessoas Físicas (CPF) is a federal taxpayer number for Brazilian and other residents. The government has recently issued an e-CPF, a digital document that can be used as a publicly provided cryptographed signature key. 

Brazil had planned to launch a more sophisticated digital ID program in 2019. The National Identification Document (DNI) connects to a national database of biometric information collected from 100 million Brazilians. 

However, the plans for DNI were put on hold due to an internal dispute.