Categories
AML

New EU Anti-Money Laundering Directive

To make the European Union AML regulations and Countering the Financing of Terrorism (AML/CFT) stronger, the European Commission introduced a new EU AML proposal on July 20, 2021. The European Union AML directives consist of four legislative proposals. These proposals, more often known as AML Legislative Package, have been published to streamline compliance processes by creating a harmonious and consistent framework of AML/CFT rules throughout the EU. 

These changes in the EU AML proposal will help you tackle the issues related to the detection of suspicious activities and transactions, and it’ll also eliminate the existing loopholes that criminals exploit. As stated in the EU’s Security Union Strategy for 2020-2025, by enhancing the country’s AML/CFT framework, it is possible to provide Europeans with a chance to protect themselves against fraudulent activities.

Four New Legislative Proposals

1. A New EU AML Authority (AMLA)

The European Union came into the global spotlight after its members launched an investigation into Denmark’s largest bank, Danske Bank which supported suspicious transactions worth 200 billion euros through its small Estonian brand for 8 years. In the past, the EU had to rely on national authorities for the implementation of AML policies in such situations.

To fix this challenge, the formation of a new Anti-Money Laundering Authority (AMLA) has been made the focus of the new AML proposal. The main purpose of AML is to address the current weak points of the AML/CFT regulation within the EU. AMLA will act as the central authority that coordinates between national authorities to ensure that anti-money laundering regulations are applied throughout the country.

2. Single EU Rulebook for AML/CFT

The second proposal suggests the transfer of provisions from AMLD5 to a regulation that is applicable to all the EU Member States. This proposal is included in the process to address the European Commission’s concern while the AMLD4 has widespread application and the directive is currently fragmented. 

Having a single rulebook for AML/CFT will help in creating harmony. For example, it will provide elaborate rules on CDD (Customer Due Diligence), Beneficial Ownership verification, and authority tasks of financial supervisors and FIUs. It’ll help existing centralized bank account registers become interconnected and provide access to law enforcement agencies. This will enhance the fraud investigations and recovery of stolen assets, but will also create transparency in the AML frameworks.

3. Expanding Traceability Requirements on Crypto

When it comes to the crypto industry, AML/CFT rules in the EU are only applicable to specific types of service providers. The fragmentation allows criminals to exploit the loopholes to their advantage. The European Union’s report states:

“The lack of such rules leaves holders of crypto assets exposed to money laundering and financing of terrorism risks, as flows of illicit money can be done through transfers of crypto assets.”

The new European Union Anti Money Laundering proposal aims to bring the cryptocurrency sector under the scope of AML regulations. All the service providers are thus mandated to perform due diligence on their customers. Additionally, anonymous cryptocurrency will be prohibited. These suggestions have been added to ensure complete traceability of cryptocurrency transactions, allowing for timely prevention and detection of money laundering. Due to the initial anonymous nature of cryptocurrencies, they quickly became a hub for money laundering.

4. AMLD6 Revokes AMLD4

The last proposal of AML regulation suggested that the 6th Anti-Money Laundering Directive will annul the current AMLD4. This directive will contain new guidelines that will be transported into the national law, such as the AML rules on national supervisors and FIUs in the member states. 

To put it simply, the new Directive will update the relevant provisions of AMLD4, and add some other amendments to it. The AMLD6 also includes the clarifications on the powers and tasks of FIUs and financial supervisors, entities that manage UBO information, the introduction of new tools to streamline risk-based supervision, and cross-border interconnection of bank account registers, and so on. All these amendments are considered vital for European Commission to tackle money laundering and terrorism funding.

Future of AML Regulations

The new EU AML proposal will be discussed by the European Parliament and council. The consultation period is set to end on 7th October 2021. 

Once the directive has been finalized, and the new AML framework has been approved, the AMLA is expected to become functional in 2024.  

Categories
Finance

UK Payments Changes after Brexit

For businesses operating globally, UK payments are some of the most challenging types of payments after the implementation of Brexit. While the vote that decided the UK’s departure from Europe took place in 2016, the changes brought forth by Brexit only came into existence in January 2021. Not just customers, but the impact of Brexit is going to be a challenge for international eCommerce businesses that also operate in the UK.

Online shopping was incredibly popular in the UK even before the Covid-19 pandemic. After the pandemic, the online shopping industry has become supercharged, and compared to their European counterparts, UK shoppers spend on average per capita (€3,344 compared to €2,184.24 spent by the average European).

As a matter of fact, the UK is the third-largest global eCommerce market, right behind the USA and China. eCommerce businesses selling to the UK have to make sure that they’re keeping up with the potential impact of Brexit on payments and shipping procedures.

How does Brexit Impact eCommerce Merchants?

If you sell products to the UK from Europe or any other country, you need to know about all the ways Brexit can impact your eCommerce business. Brexit can impact a business’s ability to accept payments from UK customers. 

  • Currency Fluctuations: The volatility in pound sterling exchange could impact the profits you make from your sales. If you charge in your native currency, while the pound is performing low, the UK customers will feel the prices are expensive and they’ll search somewhere else. Another option is to charge customers in Pound sterling, after looking at whether you need to adjust prices to consider the price fluctuations. Generally, charging in native currencies is a great practice for cross-border eCommerce that can improve sales and profit margins while reducing the sale abandonment process.
  • EU Passporting: Financial services businesses operating in the UK will no longer be entitled to provide in the EU without additional authority. The UK leaving the EU makes it a “third country” and thus businesses there lose the “EU Passport”, in turn limiting the international payments between the two countries. 
  • Changes in Local Payments: As the definition of European countries can differ between card schemes and other payment methods, local online payment methods are sure to be affected. Using a payment method that provides you access to local payment methods can help with local currency settlements and cross-border fees acceptance makes the process much better for merchants. 
  • No Freedom of Movement: Now that the UK has removed itself from the EU, there are stricter customs regulations, and goods from global merchants are taking longer to arrive. To mitigate this challenge, if your business has lots of customers from the UK, it’s worth keeping a percentage of it at a local warehouse to reduce shipping time to customers. Using a third-party fulfillment service in the UK for storage to avoid future issues.
  • Volatile Trade Rules: With the relationships between the EU and UK in jeopardy, merchants will stay up to date on new changes and all the situations surrounding them. The UK government website is a good start in terms of staying informed. 

What to Consider While Accepting Payments in the UK?

  • Keeping up-to-date on current situations and regulations around accepting payments from the UK.
  • Make sure that the price you offer to consumers considers potential changes – or do you need to adjust prices for UK consumers?
  • Offer preferred local payment methods to encourage UK consumers to stay loyal.
  • Check new VAT rules for the EU and other countries selling products and services to the UK.
  • If you already sell to both the UK and EU, you’ll now need a UK EORI (Economic Operator Registration and Identification Number) as well as EU EORI.

Brexit and New Payments: Keeping Your Business Ready

The complete impact of Brexit on accepting UK payments may not be clear, but it’s also worth being ready in advance to avoid making crucial mistakes. Many UK consumers will be experiencing a variety of challenges because of the changes, and if you can make their eCommerce experience as smooth as possible, they won’t leave your business for other customers.

Categories
Onboarding

Customer Onboarding Costs: Simple Steps to Reduce Expenses and Enhance the Process

Onboarding new customers have always been a challenge, be it a manual process or digital customer onboarding. Up until a few years ago, customer onboarding included standing in lines, slow manual document verification, and a waiting period ranging up to a few weeks. Fortunately, the pandemic took the standing in lines out of the equation. If not done properly, customer onboarding costs can go through the roof, and still, the customer experience won’t improve.

Signing up new customers should be a simple, fast and seamless process. However, most banks, financial institutions, and other businesses fail to provide a good customer experience. Every additional 5 minutes in a customer onboarding process increases the abandonment rate, thus increasing the customer acquisition costs.

By offering a seamless and positive customer experience, you’re showing your users that they’ve picked a brand that cares. However, creating a seamless, friction-proof customer onboarding process isn’t easy, here are the 5 ways you can avoid the increasing customer onboarding costs:

Steps to Reduce Customer Onboarding Costs

1. Speed up the Process

The primary reason for the increased rate of customer drop-off rate is the speed of the abandonment process. If your process takes days or weeks to confirm if a customer will be approved or rejected then you need to change the process. Most customers won’t wait that long and move towards a competitor that can provide a better experience. 

Businesses need to stay on top of the changes in industry regulations and perform the needed KYC and Due Diligence Checks while customer onboarding. However, relying on human resources to conduct KYC/AML and other checks while providing fast and accurate results are impossible. That’s where the integration of technology comes in.

2. Reduce the Number of False Positives & Negatives

Since industries of all kinds are forced towards digital transformation, fraud detection and prevention have become tougher. Fraudsters can easily create fake documents and identities that can pass as real persons. Too many false negatives mean that fraudsters are easily slipping past your defense mechanism and too many false positives mean that genuine customers are getting flagged as fraudsters and potential risk elements. The inability of reducing the number of false positives and negatives results in business loss.

Organizations need to find the fine line between fraud and friction. They need to pick fraud detection and prevention solutions that can effectively separate legit users and bad actors. According to a report, the eCommerce industry will experience false-positive losses of $443 Billion by the year 2022.

3. Update the ID Verification Methods

Traditional checks still hold some value, but outdated methods like checking credit history often result in good customers abandoning the process of being rejected by businesses. The majority of millennials don’t have CRA data and that’s one of the reasons why they are rejected. In countries where this type of data isn’t available or available with difficulty, an automated process of verification can make a lot of difference. 

By utilizing and analyzing other data sources, businesses can easily enhance their ID verification process while still providing a secure and fast onboarding experience.

4. Automation is Necessary

Technology has penetrated every aspect of our lives, and excluding it from basic business operations will only increase customer onboarding costs. Relying on manual processes is costly, ineffective, onerous, and prone to human error. Customers are unable to track their application status and there are thousands of other things that can go wrong with manual processes. 

Banks that have automated their manual processes have achieved a 32% reduction in lost documents, and have reduced the processing time by almost 60%. Automation also helped banks in reducing their storage, handling, and transportation costs by more than 35%. 

Needless to say, automated customer onboarding is faster, more accurate, and more efficient.

5. Mobile Friendliness For Better Experience

Allowing onboarding through mobile devices makes the process more accurate, and fast. The mobile onboarding process also comes with its own set of challenges, the inability of conquering these barriers can also lead to an increased drop-out rate.

 According to several studies, more than 50% of Millennials will abandon the application process if they are unable to complete it on their smartphones. That’s the reason why mobile-friendly services have a more competitive edge across industries.

How does DIRO Help?

To reduce and avoid the increased customer onboarding costs, banks and financial institutions need the help of a tool that makes their process smooth. 

With DIRO’s online document verification software, onboarding customers is easier than ever. Document verification is instantaneous with DIRO with a stronger proof of verification. DIRO’s online document verification tool can verify over 7000 document types from all over the globe by cross-referencing document data from original web sources. This results in 100% elimination of the use of forged and stolen documents during the onboarding process. By integrating DIRO’s online document verification technology in the customer onboarding workflow, firms can cut down on both time and costs while providing a secure and good customer experience.

Categories
Fraud

Guide on Types of Cryptocurrency Fraud

Almost everyone who wants to invest their money has looked towards cryptocurrencies at least once in the last few years. Cryptocurrencies like Bitcoin, Ethereum, Solana, and a few more are taking the investment market by storm. Most people invest in cryptocurrencies with the prospect of becoming rich instantly. This leads them to risk and invest in risky or complete scams instead of actual beneficial currencies. There are several types of cryptocurrency fraud and it’s easy to become prey if you’re not careful. 

Digital currencies or cryptocurrencies aren’t backed by a central entity or any government. And yet, you can use crypto for the sale and purchase of goods and services. You can even exchange it for any conventional currency. Unlike conventional currencies like the dollar or the pound, the value of cryptocurrencies is driven solely by demand and supply. That’s why the crypto market is extremely volatile, and it can bring tons of losses for those looking to get rich quickly.

As the value of crypto has exploded, so has the amount of crypto fraud. The Federal Trade Commission received almost 7,000 complaints of cryptocurrency fraud from October 2020 to March 2021. The accumulated losses in these reported instances of fraud reached up to $80 million. 

To make sure that you can identify and prevent cryptocurrency fraud, we’ve created this guide of common types of crypto fraud. 

Common Types of Cryptocurrency Fraud

While the cryptocurrency in itself is a new scam for most people, the fraud is mostly a rehash of classic scams. Some of the most common crypto fraud are:

1. Fake Websites

Fake website scams aren’t anything new. They’re often full of fake testimonials, technical jargon, fake profiles, and reviews to trick a user. Fake website scams in crypto often promise guaranteed profits or quick earnings. Those who aren’t familiar with how crypto works end up investing and losing their money.

2. Celebrity Endorsement

A new type of scam that has emerged with crypto’s success is celebrity endorsement. Masses of the population will buy crypto if it’s promoted by a huge celebrity. A recent example of this is Elon Musk’s tweet about Dogecoin.

Con artists pose as online billionaires successful businesses or well-known celebrities to trick you into buying the currency. 

3. Pump-and-Dump

Pump and dump is another scam that came into existence with cryptocurrency. Using messaging apps or social media, crypto promoters try to promote a currency with any means necessary. Their aim is to lure investors to buy, drive up the price and then sell the stake, which then causes the value of the currency to drop. Elon Musk and Dogecoin is the primary example of this. While that can’t be categorized as a scam, it’s categorized as influencing.

4. Ponzi Schemes

Fraudsters and con artists try to sell crypto by creating the illusion of big and guaranteed profits by investing in a particular currency. Federal authorities are pursuing criminal and civil cases against one such scam known as BitConnect, which raised more than $2 billion before it was shut down. 

5. Romance Scams

Fraudsters assume the identities of someone else on social media, dating platforms, and other online channels and try to persuade someone from the opposite gender to invest in a particular currency. The FBI’s Internet Crime Complaint Center (IC3) received more than 2,000 reports of crypto-based romance scams in 2021. The total losses from these types of scams reached $133 million in just 7 months of 2021.

6. Fake Wallet, Exchange, or Custodian

Not only individuals, but businesses also deal with several types of crypto fraud. Most of them involve a fake crypto digital wallet, exchange, or a fraudster assuming the identity of a custodian. As of now, there aren’t many solutions that can help businesses be vigilant about this type of crypto fraud.

Warning Signs about Crypto Fraud

There is some basic information that you can keep in mind while dealing with cryptocurrencies. The best way to prevent being a prey of a crypto scam is by looking out for warning signs. Here are some of the most common warning signs of crypto fraud:

  • Some unknown person sends you a text out of the blue regarding crypto investments. If they’re trying to get you to invest in particular crypto.
  • The pitch for a crypto investment claims that there’s no risk involved or promises guaranteed returns.
  • A call, text, email, or social media message claiming to be from a government entity, utility, or any other entity asking to pay bills with cryptocurrencies.

How to Prevent Crypto Fraud?

It’s becoming relatively easy for fraudsters to trick a business with fake or falsified wallet, exchange or custodian information. As a lot of businesses are becoming crypto-friendly, fraudsters are trying to trick them. 

Without the use of proper technologies, businesses can’t distinguish between a real person and a fake one. DIRO can instantly verify crypto account information within 90 seconds with automated user consent and impersonation check-in over 195 counties. 

The output is a machine-readable JSON file that is accepted as a court-admissible document in case of fraud. DIRO’s crypto verification API allows for real-time verification, thus reducing friction for legit customers and preventing fraud during the initial stages. 

Categories
Bank

Open Finance and Changing Role of a Bank Manager

The digital revolution in the banking industry has been put into overdrive since the pandemic, and many sectors are changing customer landscapes. Business banking is no exception. Banks are now facing growing pressure to introduce new processes in line with customers’ heightened expectations. 

One finance can transform SMB banking by replacing traditional manual processes. It also allows businesses to support digital onboarding, automated monitoring, and it can reshape the role of a local bank manager.

What Is Open Finance?

Open finance is the next step after open banking APIs and it extends to a wider range of financial data. The primary purpose of open finance is to provide consumers and businesses with better control over their finances which allows users to transform the way they access financial services.

In layman’s terms, open finance leverages consumers’ financial data with their consent and by using this data, banks can build new products and services such as online accounting, banking, and eCommerce platforms.

Challenges Faced by Bank Managers

For a long time, banks and bank managers have played an integral part in the high-street and the wider SMB economy, however, since the last decade, things have been changing throughout the financial institutions. 

In the last 10 years, the biggest banks globally have closed tons of their branches. With growing large portfolios, reducing favor of credit cards, and ineffective and old internal systems, bank managers have been having trouble in recent years. Even before financial services had to battle with the pandemic, onboarding times were slow and customers often faced poor customer experience. 

With traditional processes, bank managers are focused on admin work instead of adding value to their customers. Strong customer relationships and their presence in the community are important, winning and keeping business is a vital job when the competition is FinTechs that offer better services to the customers. The challenger bank, Starling, is the success story in the industry, and they’ve had a huge impact on the industry.

In the old times, banks relied on their bank’s managers to build relationships and tackle digital competition. As customers are becoming more tech-savvy, it’s not possible to tackle digital services with the old and traditional services.

How Banks Can Utilize Open Finance to Their Benefit?

Bank managers have 3 core responsibilities:

  • Onboarding
  • Monitoring current customers
  • Being active in new product offerings

Let’s dive deeper into these core responsibilities:

1. Digital Onboarding: So, what does online customer onboarding looks like with open finance? Instead of the usual back and forth of documents for ID and address verification, in just a handful of clicks on SMB simply connects their bank with their accounting, banking, and commerce platforms. Then banks are able to pull all necessary data for customer verification into the internal systems for an instant decision.

2. Automated Monitoring: Instead of banks asking customers for documents to keep monitoring updated, customer data can be leveraged to maintain continuous monitoring.

3. Meaningful Insights: Open finance allows bank managers to have a real-time and ongoing view of customer financial health. Bank managers don’t have to focus on 9-18 months of credit bureau data which boosts relevant and timely outreach. By leveraging open finance, bank managers can have a variety of tools in their arsenal that they can use to serve their customers better.

Adoption of Open Finance for Banks and Consumers

FinTechs are rapidly evolving and adopting financial technologies based on customer demand, the path for larger financial institutions is less clear. Now that Visa has started using open banking provider Tink, it’s just a matter of time that other providers will follow suit. Whatever happens in the industry, for banks to survive and to expand, they need to keep up with the latest technologies.

Categories
Bank

Digital Account Opening and BSA Teams

Small and large businesses are the same as they are required to follow the same Bank Secrecy Act (BSA) regulations. The associated costs and workload are manageable for big institutions with big teams, but it’s tough for smaller compliance teams. Fortunately, by implementing digital compliance tools, banks of all sizes can enhance their compliance procedures. Automated compliance tools enhance customer experience, boosting the acquisition and conversion rate of customer onboarding.

Online document verification software and online ID verification software have the potential to relieve pressure on manual compliance teams. Online verification platforms are designed to automate the workflows, reduce the risk of fraud and false positives. Banks that operate with automated solutions improve compliance efficiency by more than 50%. This also reduces the workload from BSA teams and enables a renewed focus on big-picture compliance initiatives.

Complying with The Requirements of Bank Secrecy Act

Maintaining compliance with BSA regulations can be highly expensive for most banks. Community banks may not have the budget to manage personnel for potential fraud cases. To be able to comply with the allotted time limitations is tough and expensive. However, the costs for non-compliance are even more as regulatory bodies tend to charge huge fines. 

In theory, BSA providers have to use protective measures. The result is that most banks are hesitant to invest in the latest technologies or services because of how they’ll affect compliance. Even the most common banking procedures like bank account opening can become inefficient if the staff has to spend a lot of time on KYC/AML procedures.

How Digital Banking Impacts Compliance?

BSA teams usually find that legacy technologies aren’t compatible with the development of fast and accurate compliance workflows. The alternative is new technologies that can replace legacy systems to automate key procedures. Newer and more advanced technologies should also maximize compliance protection programs. The U.S Department of the Treasury has stated that technological innovations are vital for smooth BSA compliance. 

The best technologies for account opening offer multiple benefits.

1. Automates KYC/AML Evaluations

KYC and AML compliance during the account opening is the foundation of BSA compliance. Technologies provide workflows that are built to analyze data and context clues vital for detecting fraudulent activity while providing fewer false positives. 

Banks can set up unique technologies to build a comprehensive profile for each applicant. Banks have to control every element of the KYC decision workflow in real-time. 

2. Reducing False Positives

Any transaction monitoring system generates a lot of false positives. False positives just add to human hours as they have to be investigated quickly and reported if they seem suspicious. And its worst, banks close down legitimate accounts or reject worthy applicants as a caution against false positives.

BSA/AML automation systems trigger way too many false positives which increase the burden on the BSA compliance team instead of reducing it. Doing identity checks is important but if the technology is profiling most applicants as suspects, then the solution isn’t doing the job necessary. The right type of technological solutions aims towards reducing false positives offering the BSA team relief from the overload of work.

3. Streamlining the Compliance Process

Using ideal digital solutions offers your compliance team a few critical advantages to maintain compliance. Automation is the key to success. Manual interventions slow down the processes, be it account opening, fraud investigation, or auditing. When certain factors are effectively automated, the staff has room for managing other tasks. With the right automation steps in place, your team has the bandwidth to address the risks as they emerge, thus streamlining the compliance process. 

Automation of BSA Compliance to Stay Competitive

Digitization in banking comes with a lot of perks, this also reduces the workload for the bank’s BSA teams, in turn improving compliance efforts to avoid fines by regulatory bodies. Using digital account opening software isn’t just a way to streamline compliance, it’s also an opportunity to improve competitiveness by offering customers easy-to-use solutions.

Categories
Fraud ID Verification

How Digital ID Verification Can Mitigate Crypto Fraud

Cryptocurrencies have seen incredible growth in the last decade and they are emerging as a mainstream market and a viable investment choice. Digital currency has become more famous since the Covid-19 pandemic. While the pandemic has ruined the growth of many industries, it has advanced and expanded the use of online banking and digital payment services, and digital assets like cryptocurrencies. 

While the growth is good news, the bad news is that cybercriminals love the use of digital money. The use of digital currency is like a magnet for criminals because of two primary reasons. 

  1. Global online access to money
  2. Complex and confusing systems make money laundering easier

With an unregulated market, cryptocurrencies are loved by fraudsters all over the world. Identity verification solutions assist in making cryptocurrencies safe for users. As the cryptocurrency markets are growing, the need for robust ID verification solutions is needed even more.

Exchanges Need to Enhance their Rules & Regulations

One of the major reasons why money laundering and other cybercrimes are growing in the cryptocurrency market is that not all exchanges have weak ID verification methods in place. According to a study, 56% of the cryptocurrency exchanges have weak or nonexistent KYC policies that do no good to prevent money laundering

To make things worse, some exchanges intentionally hide their country of origin to avoid complying with any type of KYC guidelines. This only plays a helping hand in the global money-laundering problem.

Compare this with banks and financial institutions, which are using groundbreaking ID verification technology using AI, Machine Learning & massive data sets to manage increasingly strict regulations. 

Some major cryptocurrency players keep up with the demand for improved AML/KYC compliance. Using third-party solutions is a more effective solution to onboard the customers.

Banks and Regulatory Bodies Want Crypto Verified

Tons of banks still consider crypto as a volatile currency and full of risk. A reputation that is upheld by constant cases of fraud and poor crypto exchanges. These behaviors don’t foster the atmosphere of trust that is vital for the future of cryptocurrencies. 

It is vital for digital currencies to create trust among the users and make them a part of mainstream financial services. Better monitoring and analysis capabilities will help mitigate the opportunities for bad actors to hide illicit financial activities among legal transactions. Also, the compliance regulations must not hinder the user experience. 

One way for crypto exchanges to smoothen the frictions associated with AML/KYC compliances is by using Machine learning technology. 

A survey showed that 80% of compliance professionals believe that machine learning could potentially improve the reduced compliance risk. Machine learning solutions are already in place at multiple banks, with a majority of $1 million annually for building strong ID verification solutions.

DIRO Online Document Verification for Secure Crypto Transactions

Cryptocurrency exchange needs to employ strong robust KYC/AML procedures to reduce the risk of increased fraud. DIRO’s online document verification solution verifies documents like bank statements, utility bills, and driver’s licenses, and so on. Verifying documents is one of the primary methods of eliminating fraudsters using cryptocurrency for money laundering.

Categories
General

Secure Online Payment Processing Practices: Protecting Customers and Businesses from Risk

Fraudsters are always looking to exploit the weak points in a system, be it ordinary banking activities or online payment. Shoppers can’t just stop making online payments due to the fear of being exposed. Customers deserve a smooth, friction-free, and secure payment experience and it’s the responsibility of a business to make that environment.

To protect customers and the business from fraudsters, merchants need to understand the best parameters and best secure online payment processing practices. By employing the best practices for secure online payment processing, businesses can ensure that every payment goes through seamlessly, be it credit cards, debit cards, or digital wallets.

Three Factors for a Secure Online Payment Processing

There are several factors that payment merchants should keep in mind while trying to build a secure online payment environment. The payment method should provide a smooth and simple experience for all types of payment methods, including credit and debit cards and digital wallets. Here are the three factors to consider to reduce payment risk:

  • Fraud
  • Security
  • Compliance

1. Fraud

How well a business manages fraud will determine its success. Fraud management is the key to businesses and may require changes to the payment methods and additional buyer identification verification. A high level of fraud can result in credit card companies stopping a merchant’s right to process payments, and it can lead to reputation loss for a business.

2. Security

As fraudsters try to find and exploit the weaknesses of a payment processor, it is up to the merchants to find all possible vulnerabilities and fix them. This will help in building a secure online payment processing environment. 

3. Compliance

Merchants need to follow the regulatory rules and regulations dictated by regulatory entities, as per their geographical location. These rules and regulations are built to protect customers and businesses from all fraudulent activities. Payment merchants need to have a clear understanding of the regulations that they’re obligated to follow to ensure secure payment processing for customers and businesses.

Best Practices for Secure Online Payment Processing

1. Matching IP Address and Billing Address

Checking the details available during a transaction can help in uncovering fraud in real-time. This can help businesses save huge sums in terms of both money and resources. Payment merchants can use the latest technologies that help in verifying the IP address of the buyer with the billing address mentioned on the credit card to verify if the credit card holder is a genuine buyer. 

2. Encrypt Information

SSL (Secure Sockets Layer) and TLS (Transport Layer Security) are standard practices that can be used to encrypt data when browsing the internet. Securing transactions with SSL protocols ensure that sensitive information is encrypted and can be accessed by the authorized recipient. 

3. Use Payment Tokenization

To build a secure online payment processing environment, merchants can use credit card tokenization. Credit card tokenization can de-identify sensitive information by converting it to a series of randomly generated numbers known as “tokens”. As a token, information can be sent and received through the internet and payment networks without sharing information that can lead to a customer being exposed.

4. Make Strong Passwords Mandatory

Fraudsters gain access to millions of accounts annually just by guessing commonly used passwords, such as names, birth dates, and common words. Merchants and eCommerce businesses can protect customers by requiring them to use stronger passwords. In case a customer forgets their complicated and secure password, they can reset it by using the “forget password” option. 

5. Leverage 3D Secure

One of the easiest ways fraudsters gain access to a consumer’s accounts is by guessing the passwords. 3D secure is a method of customer authentication designed to prevent unauthorized use of credit cards and protect eCommerce merchants from losing money in a fraudulent transaction. 

Payment merchants, credit card networks, and financial services institutions share necessary information among themselves to authenticate transactions. All merchants are required to comply with the latest regulations by the EU for better online customer verification and 3D security is one of the best ways to achieve this. 

6. Request CVV

The CVV (Card Verification Value) should be made mandatory across all payment networks. This CVV should be asked before every transaction for authenticating the user of the card, this can prevent “card-not-present fraud and fraudulent transactions over the phone.” Even if your credit card numbers have been exposed, asking for CVV information can help in the prevention of fraudulent transactions. 

7. Use Strong Customer Authentication

SCA can be leveraged by payment merchants and credit card companies to reduce fraudulent transactions significantly. SCA contains two or more elements to authenticate a customer. It requires something you know (a password or PIN) and something you have (a badge or smartphone), or something you are (fingerprints or voice recognition).

8. Continuous Monitoring

One of the best practices for secure online payment processing is continuous monitoring. Merchants need to use a payment gateway that automatically detects and manages fraudulent activity. With built-in fraud management, businesses can set rules, based on their situation and tolerance for risk, that limit or reject transactions that seem suspicious. 

9. Manage PCI Compliance

Merchants that process, store or share credit card data are required to be PCI compliant as per government rules. If a non-PCI compliant business suffers a data breach, they can end up paying hefty fines and penalties, plus they’ll have to deal with reputation damage.

Payment processors play a huge role in helping out merchants and maintaining compliance, but businesses should take a proactive role in understanding compliance requirements.

10. Train Employees to Detect Fraud

A business is as good as its employees. It should be the responsibility of a business to provide its employees with enough knowledge and skills to recognize suspicious activities and how to deal with them. When the team understands the secure payment process, they’re better prepared to identify fraudulent activities while they’re underway.

By using these practices for secure online payment processing, businesses can reduce the risk of fraudulent transactions while improving brand reputation and customer experience.

Categories
Onboarding

Importance of Client Onboarding: 5 Reasons for a Smooth and Seamless Onboarding

The client onboarding process is the first step in a customer-business relationship, so businesses need to make sure that the first impression is the best one. The moment a prospect becomes a client, a smooth and seamless customer onboarding process is crucial.

Unfortunately, complying with KYC and AML regulations has made this customer onboarding process incredibly tough and challenging for businesses. Since their first introduction in the 1970s, the total amount of laws and directives has increased significantly with annual updates. The regulatory bodies have been raising the bar for compliance, thus making the client onboarding process incredibly tough.

Under these circumstances, it’s more than important to onboard clients simply and seamlessly. Current onboarding practices, however, are often cumbersome, time-consuming, tedious, and frustrating. That’s why the importance of customer onboarding is growing which enhances customer experience.

In this article, we’ve mapped out why a business needs a simple and smooth client onboarding process and its benefits.

What Is a Good Client Onboarding Process?

One client onboarding survey found that banks themselves consider their onboarding process inefficient for the customers. Some banks and financial institutions even stated that they still rely on a paper-based customer onboarding process.

As customers are becoming technology-friendly, this process needs to be changed. Therefore, businesses need to understand the basic attributes that make for a “good” client onboarding process. 

There are a couple of things that make for a good client onboarding process.

  • Simple Process
  • Smooth Process
  • Seamless Process

A user-friendly process should be a priority while building a customer onboarding process. The ideal customer verification process sets the tone for a robust and long-lasting client relationship.

The client onboarding process should also comply with all the KYC and AML regulations. These regulations are also used to support risk assessment, it includes a long list such as Anti-Money Laundering (AML) practices, and Know Your Customer requirements. In an ideal customer onboarding process, compliance shouldn’t slow down the customer onboarding process. 

A good customer onboarding process should be fast and with a quick response time. An average customer onboarding process often takes 2-3 weeks. This needs to be changed, and the client onboarding process needs to be replaced with the online customer onboarding process. This can be achieved by leveraging technologies such as online KYC verification software, online AML verification software, or online customer document verification process.

What’s The Importance of a Good Customer Onboarding Process?

There are 5 biggest reasons why businesses should have a seamless client onboarding process:

1. Demonstrate Own Value

First of all, the implementation of a smooth and simple client onboarding process allows for a company to build healthy and loyal customer relationships early on. A good customer onboarding experience goes a long way and it stays with the customers during their relationship. First impressions of these onboarding processes count, and missed opportunities to demonstrate your company’s value.

2. Exceed Client Expectations

This is a huge reason for building great customer onboarding experiences. The customer experience can be significantly improved by implementing a simple, smooth, and seamless client onboarding. Companies can make this happen by introducing a user-friendly process for onboarding. Customers are accustomed to tiresome and tedious processes and they can be pleasantly surprised when they experience a smooth operation.

3. Increase Efficiency & Revenue

This is another reason for banks and financial institutions to build an ideal customer onboarding process. Financial services companies should focus on enhancing their process as much as possible and make that visible for the client onboarding process. The drive for efficiency should enhance the customer experience. 

4. Customer Satisfaction

If a business fails to build an impressive customer onboarding process, it’ll end up losing customers to businesses that offer better processes. There’s no business that wants to lose customers instead of acquiring them. A good customer onboarding process will bind your clients to your company. 

5. Improve Regulatory Compliance

The final reason for building a smooth customer onboarding process should make sure that all parties comply with all the rules and regulations. This part isn’t actually easy. However, a smooth and simple client onboarding process with proper AML and KYC compliance can happen by leveraging technologies.

Benefits of Client Onboarding Process

The benefits of a good client onboarding process include a variety of considerations, such as:

1. Increase Efficiency

  • Boost customer onboarding time by eliminating unnecessary touchpoints.
  • Always stay compliant with the right set of requirements.
  • Reduce costs by increasing efficiency

2. Enhance Business Potential

  • Increase the scalability of business by understanding requirements across major jurisdictions.
  • Minimize risks and misconduct by understanding the regulations.

3. Try to Boost Client Satisfaction

  • A simple, smooth, and fast customer onboarding process is equivalent to limited interactions, which leads to increased customer satisfaction.
  • Increases the reputation of the business by adding real value based on great customer experiences.
Categories
AML

Best AML Compliance Rules for Fraud Prevention

Money laundering schemes are almost impossible to detect if a financial institution doesn’t have a proper anti-money laundering compliance regulations program. Money launderers leverage internal systems of businesses like FinTechs, banks, insurance companies, cryptocurrency dealers, gaming platforms, casinos, and other financial institutions to move illegal money around to make the money look legit. The flow of money laundering can be disrupted following AML compliance rules.

The primary goal of anti-money laundering rules is to uncover abnormal patterns between millions of transaction data, generated every day with financial accounts. By implementing regulations that have been outlined by AML laws in the Bank Secrecy Act (BSA) and the USA Patriot Act, financial institutions and related service providers can help regulatory bodies and federal law enforcement agencies and prevent the flow of money laundering. In this article, we’ll discuss the top 10 AML rules for compliance programs.

What AML Compliance Rules Do I Need to Consider?

While building a successful AML compliance rule program, firms need to meet a minimum standard set forth by the federal government. If a financial institution, does not meet these standards, government agencies such as:

  • Financial Crimes Enforcement Network (FinCEN)
  • Financial Action Task Force (FATF)
  • Financial Industry Regulation Authority (FINRA)

If financial institutions fail to follow through on the rules and regulations, these agencies can fine the institutions.

Compliance teams need to make sure that all the regulations apply to a financial institution and its specific business type and locality. Businesses need to develop proper methods and internal controls, including risk assessment and customer identification programs, to fulfill the due diligence requirements.

Anti-Money Laundering Rules for Compliance Program

Complying with anti-money laundering rules can be challenging for businesses of all scales. As all businesses have different risk factors and appropriate thresholds. However, there are some basic rules that every financial institution needs to follow. 

Below, we have mentioned 10 rules for anti-money laundering compliance programs, and these rules are the first point in building a successful compliance program.

1. Structuring Over Time

Structuring is a money-laundering activity that involves splitting the transactions into multiple smaller transactions to avoid reporting requirements. This rule should detect an excessive proportion of transactions below the reporting limit. Financial institutions are required to report transactions over $10,000, so banks need to look for transactions that are just below $10,000.

2. Profile Change Before a Large Transaction

This rule is for identifying instances where customers make profile changes to PII (personally identifiable information) shortly after making a huge transaction. This often signifies account takeover or potential “transaction layering” activity to obscure the path of the funds. 

3. Suspicious User Financial Behavior

Another common rule for anti-money laundering is keeping track of suspicious financial behavior. Financial institutions should look forward to identifying transactions that are different from an individual’s usual spending behavior. You should also look for behaviors that are not common for a financial party’s financial profile. 

4. Increase in Transaction Volume/Value

This rule for anti-money laundering should help in identifying parties with high pay-out transaction volumes or a significant increase in the value of a party’s outgoing transactions compared to their recent average.

A rule like this is perfect for a P2P payment network with the capability to withdraw funds to an external account. The rule should filter out entities that have their bank accounts for a short amount of time and parties with a low balance and low outgoing transaction value over the relevant time window.

5. Circulation of Funds

Circulation of funds happens when individuals pay themselves using different accounts. This rule should detect situations where:

  • The party deposits casino checks
  • Purchase of bank drafts that are used at casinos
  • Casino checks whose memo indicates that the funds aren’t the result of casino winnings

This rule should also look for transfers between parties that have the same IP address.

6. Excessive Flow-Through Activity

This rule for anti-money laundering should help in identifying parties where the total value of the credit is similar to the total value of debits in a short period. A rule like this should be perfect for a financial service that offers a collection of funds where there won’t be comparable spend activity.

7. Low Number of Buyers

For platforms that see several buyers, interacting with a single seller, the rule should detect merchants that only receive from limited buyers. This can help regulatory bodies uncover collusion and circulation of funds. This rule for anti-money laundering should only look for accounts older than a specific time period.

8. Low Communication Between Buyers and Sellers

Platforms that keep track of the frequency of communication between buyers and sellers on the service, this rule can also identify merchants with high earnings but very few sent messages, which can indicate money laundering instead of normal business activities. 

9. High-Risk Jurisdiction

This rule for anti-money laundering compliance relies on geographic-based risk factors for countries and regions where money laundering is common. Some examples of risk categories include high banking secrecy, high financial crime, high drug trafficking, and known tax-evading countries. 

It’s important to keep this AML program rule updated based on the latest information. For example, in June 2021, the FATF updated its list of the geographical locations under monitoring to also include Haiti, Malta, the Philippines, and South Sudan. Ghana was removed from the list after new information. 

10. Anonymous Source of Funds

The last AML Program rule should look out for situations where the party sends funds into decentralized exchanges and then extracts the funds, which is used to anonymize the funds. 

It can also help in identifying when the party converts the currency into gaming tokens and then withdraws them for money laundering purposes.