Category: General

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Crypto Regulations in Canada & U.S: Latest Updates and What You Should Know

crypto regulations of usa, canada & EU

The regulatory landscape for cryptocurrencies has been changing rapidly in the past few months. New regulations, along with old ones, have also come into force. In this article, we will be discussing the latest developments in the crypto regulations landscape in Canada and United States. The concerns around potential risks arising from investing in cryptocurrencies or token sales led to a tightening of the regulatory environment by several securities regulators in both the United States and Canada.

The Canadian Securities Administrators (CSA) published a notice on September 12 that outlines their views on how securities laws apply to businesses that deal in virtual currencies such as bitcoin and ether. And on September 25, the U.S Securities and Exchange Commission (SEC) announced that it will begin monitoring digital token sales to protect investors from risks involving unregistered securities.

Canada

Canada has been one of the most active jurisdictions in terms of regulating cryptocurrencies, digital tokens, and Initial Coin Offerings (ICOs). As early as 2013, the Canadian government published an analysis of the risks associated with cryptocurrencies. In the same year, Canada’s federal budget stated that the government will “develop options for the treatment of virtual currencies”.

In December 2017, the Canadian Securities Administrators (CSA) published a notice that explains how regulation of “securities offerings of investment contracts” applies to ICOs. The notice notes that “an investment contract exists when a person invests their money in a business and expects to earn a profit from the investment”. The CSA also clarified that an ICO falls under the definition of an ‘investment contract’. Therefore, the sale of cryptocurrencies or tokens cannot be done outside of the regulatory framework.

United States

The United States has also been proactive in regulating cryptocurrencies, digital tokens, and ICOs. However, there is a significant difference between the regulatory approaches taken by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). As far as cryptocurrencies are concerned, the SEC is of the view that they are securities and therefore, they are subject to the Securities Act of 1933 and the Securities Exchange Act of 1934. The CFTC, on the other hand, believes that cryptocurrencies are commodities and are regulated by the Commodity Exchange Act of 1936.

Exchange-Traded Funds (ETF) Proposals

An ETF is a fund that owns the underlying assets (in this case cryptocurrencies) and divides ownership in the fund into shares. These shares are then listed and traded on a stock exchange. If an ETF has a good performance, it means that the value of the fund will increase and the shares will be worth more. A few exchanges have filed proposals to the SEC for the launch of ETFs that will invest in cryptocurrencies as well as tokens.

The Winklevoss twins, who are well known for their involvement in cryptocurrencies, have also applied for a Bitcoin ETF. Most of these proposals are still under consideration by the SEC. However, in August, the SEC rejected a proposal filed by the Winklevoss twins for a Bitcoin ETF. The SEC noted that the proposal was not consistent with the definition of ‘security’ as provided in the Securities Act of 1933 and the Exchange Act of 1934.

Crypto Regulations in the EU

The EU has been thinking about crypto the same way as other countries. According to a report, around 17% of Europeans have purchased Crypto. Most residents see crypto as a long-term investment. It’s not yet accepted as a payment method. 

There is some curiosity about the topic as a lot of people are interested in learning about payment methods.

As of right now, there are different crypto rules that every country has set for itself. In the 5AMLD regulations, crypto exchanges and crypto wallet providers are considered “obliged entities” and they’ll have to face the same rules as other financial institutions. 

While 5AMLD brought crypto exchanges under the scope of AML regulations, there’s not a single KYC rule across the EU. In 6AMLD, there will be a single guideline/rulebook for KYC all across the EU. 


Currently, the directive is making its way through the member states’ legislative processes, and it will take some time for complete implementation.

Regulation on Markets in Crypto Assets

In September 2020, the EU Commission proposed the regulation on markets in Crypto assets to provide some kind of legality around the treatment of crypto-assets. The end goal is to promote innovation, offer proper protection to consumers, and make sure that the financial market stays stable.

The EU Commission approved the regulation in March 2022, almost pushing it towards becoming a law. It is expected to become a law by 2024.

According to the commission, enabling full access to the internal market and providing legal certainty will lead to innovation. 

To minimize the risk of money laundering, the goals of MiCa include:

  • Managers and principal shareholders are perfect for purpose and have sufficient expertise in dealing with AML and Combating the Financing of Terrorism regulations. 
  • Robust internal control and risk assessment mechanisms, systems, and procedures are set in place to make sure the confidentiality of information is kept intact. 
  • Crypto assets service providers need to maintain records of all kinds of transactions, orders, and services related to crypto-assets that they offer.
  • Systems are set in place to detect potential market abuse committed by clients.

Consumers need to have a proper understanding of the EU and country-specific regulations for investments, banking, payments, and due diligence to understand MiCA.

Crypto Regulations for Germany

In Germany, 40 banks are already interested in offering crypto custody services after the latest AML laws. With EU-wide rules and an open market, there are some specific expansion opportunities.

Under the German Banking Act (KWG), licenses are required for crypto exchange platforms. BaFin is the German Federal Financial Supervisory Authority is the authority that has issued guidance for managing crypto securities registers. 

In Germany, the identity requirements include:

  • First and Last Name
  • Place of birth
  • Date of birth
  • Nationality
  • Residential address

Crypto Regulations for France

Out of all the countries, the KYC rules in France have been hardened the most to include all Crypto transactions. This includes crypto-to-crypto transfers. The rules in France are harsher than in other jurisdictions. Holding anonymous accounts is prohibited and there are strict KYC obligations for every account. All crypto accounts have to undergo the identity verification process.

The ID verification for a crypto account in France includes:

In the coming couple of years, Europe’s crypto landscape will change dramatically. Especially after MiCA and other regulations become effective.

New Regulations for Exchanges and ICOs

There have been changes in regulations governing exchanges, which are the platforms on which cryptocurrencies are traded. Most of these exchanges have been registered as trading facilities or alternative trading systems (ATS) under the Securities Exchange Act of 1934. A trading facility is an entity that regularly facilitates the purchase or sale of securities or commodities, while an alternative trading system is an entity that facilitates the trade of securities or commodities in a manner that does not trigger a regulatory requirement.

In Canada, exchanges must now register as trading or commodity boards. In the U.S., exchanges must register with the CFTC as commodity trading advisors (CTAs) or derivatives clearing organizations (DCOs). Similarly, the SEC has proposed regulations for ICOs. These regulations would require ICOs to register with the SEC as an investment of securities.

Conclusion

The regulatory landscape for cryptocurrencies has been changing rapidly in the past few months. New regulations, along with old ones, have also come into force. In this article, we will be discussing the latest developments in the cryptocurrency regulations landscape in Canada and United States. The concerns around potential risks arising from investing in cryptocurrencies or token sales led to a tightening of the regulatory environment by several securities regulators in both the United States and Canada.

The Canadian Securities Administrators (CSA) published a notice on September 12 that outlines their views on how securities laws apply to businesses that deal in virtual currencies such as bitcoin and ether. And on September 25, the U.S Securities and Exchange Commission (SEC) announced that they will begin monitoring digital token sales to protect investors from risks involving unregistered securities.

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Verizon 2022 Annual Data breach Report

verizon data breach report 2022

The 15 year old tradition is still standing strong with this week’s DBIR Annual Report. In the latest data breach report, Verizon highlighted their analysis of over 5,212 breaches and 23,896 security incidents to find the most common trends used by fraudsters. The 4 most commonly used methods include enterprise estates, credentials, phishing, and exploiting vulnerabilities.

In the report, it was stated that the hackers prefer to exploit the human element (errors, misuse, and social engineering). By combining these elements and the entry points above, hackers find access to organizations and begin stealing data. As a matter of fact, Verizon Data breach report states that 82% of all breaches this year were because of the human element. Human elements can be anything, including errors, misuse, and social engineering. 

Other factors were also included in the high number of data breaches, including:

  • 45% were related to credential resume
  • 25% of breaches were due to social engineering
  • 50% were related to remote access and web apps

Verizon’s 2022 Data Breach Report – Takeaway

The core of this year’s data breach report was that the weakest link out of all are humans. The reason for that is simple, it’s because users continue to click on malicious links, and they continue to lose or hand out their credentials. Users all over the world are making the same kind of mistakes that hackers love to exploit. This is what provides hackers the back passage to sensitive systems of a business. While humans are making mistakes, it’s not a surprise as humans are bound to make mistakes. If these reports are scaring you, then worry not, it’s not all bad news, because you can always find ways around this problem.

While eliminating the human element from this equation sounds challenging for businesses, there are other options as well. Verizon recommends the usual approach can reduce usual approach to reduce some challenges, such as two-factor authentication and/or implementing password managers for users, all In an effort to avoid the impact credentials introduce. 

Using this approach, you can reduce the likelihood of attackers being able to exploit poor passwords to gain access to applications,  systems, and data. These capabilities have been available online for use, but the number of data breaches is increasing every single year. 

Let’s focus on credentials for a moment. Why? If you do a quick search for credentials in the report, it appears over 86 times. With that in mind, the report suggests, “unfortunately, if you can access the asset directly over the internet by just entering credentials, so can the criminals.” If we can improve on authenticating users without the use of usernames and passwords, then organizations can reduce the risk of data breaches. 

Another way to reduce the risk of data breaches is by onboarding customers smartly. With DIRO online document verification, businesses can streamline their KYC and KYB verification processes. 

With smarter customer onboarding practices, organizations can save time, money, and effort. DIRO offers a range of verification solutions that can be used for:

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Age Verification: Use Cases, Regulations, and Guidelines

age verification

Digital age verification is crucial in this day and age. So in this article, we will talk about how age verification works, different rules and regulations, and minor protection in different parts of the world. Almost everyone can get easy access to digital products and services. According to a survey in 2015, almost 1.46 billion consumers purchased goods over the internet. This number increased drastically by 46% since 2021. This can be credited to the COVID-19 Pandemic. In the current situation of the world, more and more people love to purchase products online. While the rising number of online customers is great for online businesses, it also creates challenges.

Today, minors can easily get access to age-restricted content from all over the internet. Unlike the offline world, where minors can’t get access to alcohol or tobacco, buying goods online is completely different. According to research, more than 1 million minors fell prey to ID theft in 2017, which resulted in a $2.6 billion loss.

What Is Online Age Verification?

Online age verification is a process to protect individuals and audiences from consuming non-age-appropriate content. Merchants of age-restricted products need to take responsibility to sell their services only to people over their age. For online businesses, it is essential to understand the age of their users, and digital age verification is a great way to get around it. It is a safe way for minors to perform online activities, and maintain regulatory compliance.

Digital Age Verification vs Manual Age Verification

Since the inception of adult-based services, verifying your age has become a common practice. Tobacco and alcohol stores don’t allow minors to purchase and consume these products. According to regulations by the Food and Drug Administration (DSA), the minimum age for buying and selling tobacco products is 18. These laws can perfectly work in offline stores as there is someone available physically to verify age. When it comes to online stores, verifying the age of an individual becomes challenging. 

So, it makes sense that minor protection rules should also apply to digital businesses. Digital business vendors often just ask for usernames and passwords to protect the users. There’s a huge need for verifying the age of minors before they interact with these platforms. Fortunately, just recently there have been huge developments in the online age verification methods. 

Compared to a couple of years ago, verifying an individual’s age has become relatively easier by relying on biometrics technology. There are several age verification systems available today that rely on AI and Machine learning to smartly identify if the individual behind the screen is minor or grown-up.

How does Digital Age Verification Work?

Age verification helps businesses onboard legitimate customers and prevent minors from using age-restricted processes. Here’s how most age verification processes work:

1. Submit the Date of Birth

The user has to submit date of birth information including date of birth using an online form as provided by the vendor. 

2. Upload Documents

Users upload date of birth documents that are issued by the government. These include documents such as ID documents, driving licenses, or passports.

3. Verification Process

Based on the information provided by the users, businesses verify the age of the users. This happens by using a document verification solution or an online ID verification solution. Based on this verification, the end-user is verified and declined.

Global Age Verification Guidelines

Different geographical locations have different guidelines when it comes to age verification. If there’s one thing similar about all the guidelines, it’s that all of them focus on parental controls. The main purpose is to make parents aware of appropriate services for their children and obtain consent for the children to use these services. 

1. Age Verification in UK

The UK government made some changes in 2017, to make sure that a country is a safe place for children. Following that, some changes have been made to the laws to limit easy access to age-restricted products and services. 

The online age verification provider, interactiveAgeCheck (iAC) is responsible for minor protection. This is backed by CitizenCard, UK’s biggest photo-ID and age verifier organization. It thoroughly considers recommendations made by the UK Council on Child internet safety.

2. Age Verification in Europe

The GDPR (General Data Protection Regulation) is issued by the European Union and applies to the citizens living in EU states. It has a complete set of rules and guidelines for the collection of personal data. This information includes biometrics, health, and genetic information. The GDPR’s Article 8 allows the age of consent to be anywhere between 13-16. This suggests that anyone over the age of 16 in the EU is allowed to consume age-restricted products and services. 

3. Age Verification in USA

The Federal Trade Commission’s minor protection law is named COPPA. It’s one of the most impressive and crucial minor protection laws in the USA. The rule book outlines how companies should collect and verify information related to children under 13. complying with these regulations doesn’t just include age-restricted content warnings, or integrating an age verifier.

The Cellular Telecommunications and Internet Association issued guidelines on restricting career content not suitable for younger audiences. It outlines different content rating standards so that the parents are aware of the type of content suitable for their children. By using internet access control offered by major internet carriers, consumers can limit access to specific websites using filters or block certain websites. 

4. Age Verification in Australia

The Australian Communications and Media Authority (AMCA) put out a new guideline in 2008 to prohibit minors’ access to age-restricted content. These regulations apply to anything aired in Australian media or hosted on TV channels within the country. The broadcasting Services Act of 1992 played a vital role in the development of these frameworks. 

For every content rating group, these rules offer a different set of customer verification, the MA15+ guidelines require:

  • A warning message that the content is MA 15+
  • Safety information for parents to protect their children who are below 15

The RA18+ guidelines contain rules regarding:

  • Warning about the risk of using proof of age by another person or someone who’s not eligible based on their age
  • Consider which evidence is provided, and how it’s presented

Risks of Not Completing Age Verification Checks

There are some risks of not having the age verification methods. These include non-compliance and a drop in market reputation for offline and online businesses at the same time. Generally, the perceived level of risks involved figures out the level of control and application of the regulatory framework.

Here are some risks of not having proper age verification mechanisms in your process:

1. Compromised Market Reputation

Building a great business requires providing customers with the best customer experiences. User satisfaction is crucial in building loyalty for customers and building a good reputation for your brand. Not investing in age verification software can hurt your business by having a negative brand image. Not having a proper age verification process can lead to easy access to age-restricted products and services, it puts minors more at risk. 

2. Non-Compliance fines

All kinds of vendors and organizations have to comply with GDPR, regardless of the type of products and services they offer. The purpose of this regulation is to maintain privacy and secure record-keeping. These regulations are equally important while verifying the age of individuals during onboarding processes. Non-compliance with GDPR can lead to hefty fines for businesses. 

Till 2016, non-compliance fines for COPPA were 160,000, which were later increased to 43,280 dollars.

3. Financial Losses

Online businesses can reduce fraud in chargebacks by parents for non-consenting transactions. Having an age identifier or verification process integrated into your onboarding process can help in reducing financial losses. 

Conclusion: Importance of Age Verification

In the end, the age verification process is crucial to protect the young generation from the adverse effects of age-restricted products and services. Merchants have to take on the social responsibility to secure minors and restrict their access.

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What is Signature Verification?

What is digital signature

The widespread use of digital signatures has raised tons of questions. Most of these questions are related to user security. Numerous individuals and businesses see the benefit of transitioning from the traditional method of signing documents. The traditional method requires printing, scanning, hand-signing, and re-scanning of the documents and they are a huge security threat. Overall, they’re unsure how the digital signature verification process works.

The solution is to remove the mystery regarding the digital signature verification process.

How do Digital Signatures Work?

The terms digital signature and electronic signature are often used interchangeably, but they are very different from each other. The first point is understanding the difference between electronic and digital signatures. Digital signatures are a type of highly secure electronic signature, and they have a robust verification process. 

eSignature or Electronic signature on the other hand refers to any virtual mark (Like an image file) that is included in a document to signify approval. Digital signatures work by leveraging an encrypted system that is based on a standard technological framework called Public Key Infrastructure (PKI). Certified authorities provide individuals with a digital certificate, which is stored by them mostly on a USB stick. 

Whenever the individual wants to sign a new document, they’ll have to attach their digital signature to the document using special software. An encrypted “hash” that is specific to that document is then created. The individual that’s sending the document then has to match the digital hash with a public digital certificate, in turn verifying the signature. 

Most digital signature providers use a mathematical algorithm to generate digital signature keys. 

  • Public key
  • Private key

Whenever a signer digitally signs a document, a new cryptographic hash is created for the document. This is done to verify the authenticity and integrity of the document. The recipient of the digital document can decrypt the encrypted hash by using the sender’s public key certificate. Once that is done, a new cryptographic hash is created from the receiver’s end.

While verifying digital signatures, both the cryptographic hash are compared to check their authenticity. If the hashes match, the document is original and it hasn’t been tampered with.

The Role of Digital Signatures

Over time, digital signatures have become a norm for all businesses. In many regions, including parts of North America, the European Union, and APAC, digital signatures are considered legally binding and they hold the same value as traditional document signatures.

In addition to digital document signing, they’re also used for financial transactions, email service providers, and software distribution. Digital signatures are crucial in specific industries where authenticity and integrity of digital identity are important. 

Industry-standard technology known as public key infrastructure makes sure to authenticate a digital signature is valid.

Why Should You Use PKI or PGP with Digital Signatures?

Using digital signatures that are supported by PKI or PGP improves their strength and significantly reduces the possibility of security threats. You can reduce security issues that often come along with transmitting public keys, by simply verifying that the key belongs to the sender, and verifying the identity of the sender. Verifying the identity of the sender is crucial when you’re dealing with a digital signature.

The level of security of the digital signature is completely dependent on how secure the private key is. Without PGP or PKI, proving someone’s identity or revoking a compromised key is next to impossible. If the private key is not well protected, it could allow malicious actors to assume the identity of someone else and go through the process without proper verification. 

By relying on third-party verification services, businesses and individuals can verify digital signatures. This can ensure that the digital signatures are not being used by someone who doesn’t have the authority. 

As paperless, and online transactions are growing day by day, the use of digital signatures can help you protect and secure the integrity of your data. By understanding and using digital signatures, you can protect yourself, the information you share, confidential documents, and transactions. 

How are Electronic Signature Verified?

And how are electronic signatures verified? Numerous legislation like the ESIGN (The Electronic Signature in Global and National Commerce Act), UETA (The Uniform Electronic Transactions Act), and eIDAS (Electronic Identification, Authentication and trust Services) offer the validity of electronic signatures. 

The process for verifying electronic signatures is a lot similar to traditional methods that are used to verify physical pen and ink signatures. Verification is essentially about proving an electronic signature was made by the intended signee by verifying the data, location, and time of the signature. This helps in ensuring that the document wasn’t tampered with. 

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Use of Biometrics for Improved Onboarding Experience

biometrics

The pandemic has changed a lot of ways we do basic activities. The retail space, banking, education, hospitality, and several other industries took the brunt of the pandemic. Fortunately, the reliance on technology improved how we used to do basic activities. These technologies have specifically increased the efficiency of customer onboarding and employee onboarding. So, instead of using physical documents and in-person verification, digital onboarding methods are being used.

Many banks are now generating lower levels of revenue, with some banks reporting a decline as low as 70% from the year before the pandemic. Many banks had to lay off employees and permanently close some of their branches. Banks that have stayed open have adopted new technologies and shifted their day-to-day operations around the technologies available to them. Customer onboarding, ID verification, customer authentication, and other processes all became digital.

While the digital transformation was already underway in the banking sector, the pandemic pushed the transformation into overdrive. Evolving customer expectations, growing FinTechs, and changing regulations around technologies are also helping in speeding up the digital transformation process. By implementing digital ID and document verification solutions, banks can improve the onboarding experience while managing fraud.

Utilizing Biometrics Technologies in Banking

Every person in the world has a unique set of fingerprints and unique hand geometry. Biometric identity verification systems examine these and other biometrics identifiers to identify individuals. The utilization of these systems improves security, speeds up the verification process, and prevents cybercriminals.

In this socially-distanced economy that we’re currently living in, cyber attacks are becoming more prevalent and sophisticated. Fake identities and synthetic identities are on the rise which makes it harder for banks to detect fraud. Almost half of U.S. consumers have experienced some kind of ID theft in the last two years, more than 37% of people have experienced application fraud, and almost 40% of consumers have experienced account takeover fraud.

But it’s not always easy to implement these new methods, and banks have to follow strict compliance standards they have to follow during customer onboarding, which can make it difficult to find a one-stop solution for all kinds of consumers. They need solutions that comply with digital privacy guidelines and updated financial regulations. They also have to make sure that the onboarding experience isn’t too difficult or time-consuming for consumers. Luckily, consumer opinion regarding new technology is changing, which means the adoption of these technologies can be easy.

Use of Biometrics for Customer Onboarding

Biometrics is the most reliable way of authenticating identities and it’s a great method of preventing ID theft and spoofing. Banks know that the use of biometric verification can be helpful as they were the first industry to use them. Banks are now also relying on facial biometrics as multi-factor authentication. This is because facial recognition does not require customers to be physically present at the branch, because of fingerprint scanners, palm scanners, and iris scanners.

Banks all over the world are using layers and layers of biometrics technologies in their daily operations. Banks are now discovering that they can use facial biometric verification since the beginning of customer relationships. This reduces complications for a customer, alleviating the pressure to remember a confusing PIN or token. Using biometrics across banking makes transactions more secure and overall increases security. Moreover, it boosts operational efficiency, all the while making the experience easier for the customers.

Use of Biometrics for Employee Onboarding

As more and more employees are working remotely because of the pandemic, that’s why securing the employee onboarding process is as important as customer onboarding. Employee security breaches are a big concern for all large organizations that deal in sensitive data of any kind. Having a biometric in the employee onboarding process is quite similar to customer onboarding.

Employee-owned smartphones are loaded with a mobile app that initiates their enrollment into your business. Or companies can build a custom employee onboarding program by combining online document verification services and biometric verification.

Digital Transformation Across Industries

Before the Covid-19 pandemic changed the world, retail banks and credit unions completely relied on manual onboarding processes. This clumsy process was time-consuming, inefficient, and insecure. Collecting identity information can be laborious and waiting for the information to be verified can take even longer, thus making the process inefficient.

Online onboarding technologies verify customer identities by comparing customer photos and IDs. And verify online documents such as utility documents, bank statements, and other documents. This improves the user experience and reduces abandonment rates. Plus it can be done remotely, without customers needing to stand in big lines and it also reduces the document handling costs for banks and other businesses.

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Electronic Signatures and Digital Signatures: All You Need to Know

Electronic Signatures vs Digital Signature

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

What Is an Electronic Signature?

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

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

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

What is a Digital Signature?

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

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

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

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

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

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

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

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

What Types of Signatures are Legally Binding?

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

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

Which Document Signing Platforms Support Digital Signatures?

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

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

aml technologies

For most people, money laundering is a crime that just happens in movies, TV shows as it doesn’t have anything to do with them. Unfortunately, money laundering is a huge problem for businesses all over the globe. Other types of financial fraud are also common for businesses, especially financial services and FinTechs that allow users to exchange funds. With the use of proper AML technologies, organizations can stop the flow of money laundering. 

These businesses and institutions can be used to finance criminal empires and support terrorist funding without being aware. This opens the business to legal actions and huge fines by a regulatory body for not complying properly with AML regulations. Banks, financial institutions, credit unions, and others must stay compliant with AML technologies, by utilizing the latest technologies and by training employees.

Below we have listed some of the best and modern sophisticated technologies to keep an eye out for as AML continues to evolve.

Sophisticated AML Technologies for Developing Effective AML Compliance Programs

Developing effective AML compliance programs isn’t a choice for businesses, financial institutions are legally obligated to comply with AML regulation. Financial institutions of all kinds must utilize new AML technologies as it is one of the best ways to stay compliant. 

AML regulations state that banks collect customer information and monitor all suspicious transactions and activities. Suspicious activities of all kinds must be reported to financial regulatory authorities like FATF. Here’s our pick for technologies that help financial institutions comply with existing AML regulations.

1. Automated AML Screening Solutions

Financial institutions and other money-related businesses have millions of clients. Monitoring every single of these customers is almost impossible without using automated AML screening solutions. 

AML technologies automatically check the clients of a business against national and international checklists. These lists can be made up of global and regional lists, watchlists, PEP lists, and other lists. With automated screening, businesses will be able to identify high-risk individuals and complete a fair and complete risk assessment. These actions fall under the term “RPA (Robotic Process Automation)”, which means the technology uses AI to screen and monitor accounts for potential money laundering. 

The best AML screening solutions use AI-powered automated AML screening to assess all the risks and perform monitoring.

2. Transaction Monitoring Tools

Suspicious activities according to the government can be a single transaction or a pattern of unusual high-risk transactions. For example, the Bank Secrecy Act (BSA) states that any transaction in the US for more than $10,000 should be reported. 

However, financial criminals are also aware of these regulations so they use several transactions of less than $10,000 to stay out of suspicion. To detect all suspicious financial transactions, a business should look for complex patterns. 

Monitoring every single transaction is without a doubt one of the best ways to stay compliant with AML regulations, but using automated software will make this a much easier task. Tools such as DIRO online bank account verification can help in reducing financial fraud by verifying if the person using the account is legit or not.

3. AI-Based Solutions

Artificial Intelligence has already infiltrated almost every part of our lives. It can instantaneously analyze a huge amount of data and use specifically designed algorithms and detect anomalies that humans can’t.

AI can have countless implementations in a spectrum of industries, ranging from cybersecurity to fraud prevention to data management. Artificial intelligence is not exactly a tool, if used properly it has characteristics of an AML screening and transaction monitoring solution. 

4. Machine Learning Solutions

Machine learning is a small part of AI and it is a type of software program that utilizes data and algorithms to recognize patterns in transactions that can be deemed suspicious. Over time, the machine learning program detects changes in customer behavior, which makes it easy to identify suspicious activities.

These machine learning solutions are built to analyze data and anticipate the behavior of a customer. If a client’s transaction habits suddenly change, then these solutions will notify the businesses of any suspicious transactions. Thus sudden changes in a customer’s financial habits may include unusually large deposits and withdrawals, change in frequency of transactions, and so on. 

Need for Effective AML Technologies

Non-compliance with the AML regulation can cause you to pay huge fines imposed by regulatory bodies. The total amount as fines imposed in 2020 surpassed 14 billion dollars, with Goldman Sachs and Westpac the largest organizations being fined. Non-compliance won’t just lead to fines, it can also make it harder to detect and prevent criminals from entering the financial institution’s internal systems. 

Each country has its own regulatory body and law enforcement specialists whose only aim is to protect the financial system. In the U.S FinCEN is the regulatory body that watches over all the financial institutions and ensures that the regulations are being followed. 

With the rapid increase of money laundering and digital transformation in the banking industry, complying with AML regulation has become even more important for regulators and businesses. While businesses are legally obligated to comply, doing so will help in preventing money laundering.

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Know Your Customer Compliance: How Much Does It Cost To Verify Customers?

know your customer cost

Trust goes both ways, both the customers and businesses need to trust each other for maintaining a healthy relationship. Even in the digital age, earning trust is crucial. If a brand can offer trust in all its services, customers will stay loyal to the product and services. With the heaps of data breaches and financial fraud, firms have to make their customers believe that they are capable of protecting their information and transaction history.

To maintain a brand reputation, firms have to make sure that fraudsters don’t gain access to the internal systems and harm customer data. As most businesses are moving towards an online environment, the process of verifying customers is changing. 

Financial services are regulated by domestic and international bodies that provide a set of rules around Know-Your-Customer (KYC) regulations. Following up with the KYC compliance is important for reducing fraud, preventing money laundering and other financial frauds. 

Maintaining Balance Between Time & Cost 

The need for complying with KYC requirements has complicated the account opening process. A survey conducted in 2017 stated that the customer onboarding process increased 22% in 2016. The time taken is expected to increase by 18% in 2017. To put a number on that, banks took an average of 24 days to complete the customer onboarding process. Banks and financial firms need to improve their customer onboarding process using online verification methods.

Why Developing a 360-Degree Customer Profile is Crucial?

Building a complete 360-degree customer profile can’t happen if businesses rely on only a single source. A lot of information has to be acquired from a series of sources. Traditional systems can’t handle the data sources, and developing a complex set of integrations is costly and time-consuming. Having a proper customer profile helps banks and financial institutions to assess the risk level. With market dynamics changing constantly, there aren’t just enough tools to build the profiles. Building a comprehensive customer profile relies on three factors. 

  • Access to data from multiple sources
  • Collecting and managing customer data in one place
  • Assessing the information and converting it into actionable insight.

How Much Does KYC Know Your Customer Cost?

According to a report, financial institutions end up spending more than $500 million annually for KYC compliance. If we talk about JPMorgan, in 2013 they added 5,000 employees to their compliance team and spent $1 billion on controls. These trends show that the costs revolving around KYC compliance are growing.

KYC compliance processes have internal and external costs. Internal costs directly affect the verification process. The internal costs of KYC compliance include systems, licensing fees to operate checks, and staff/offices. External costs for KYC compliance include regulatory guidelines that require new training for all staff. 

Depending on the business’s scale, firms can have hundreds to thousands of compliance staff for customer verification and monitoring transactions. 

Steps Included in Know Your Customer Verification

KYC procedures are usually defined by banks and they involve necessary actions to ensure their customers are real, assess and monitor the risks. Strong KYC procedures help in preventing and identifying money laundering, terrorism funding, and other illegal schemes. 

KYC verification includes ID card verification, biometrics verification, and document verification (bank statements, utility bills, and more). Banks have to comply with KYC regulations and anti-money laundering regulations to detect and eliminate fraud. To comply with KYC regulations is a responsibility banks have to follow through. Non-compliance with KYC and AML regulations can lead to heavy fines imposed by regulatory bodies. 

From 2008-2018, a total of USD 26 billion in fines have been levied for non-compliance with AML, KYC.

Know Your Customer KYC and Customer Due Diligence Methods

The KYC policy is crucial for banks and financial institutions used for the customer identification process. The regulation is born out of 2001 Title III of the Patriot Act, which aimed to provide tools for reducing terrorist activities.

To comply with the domestic and international regulations against money laundering and terrorist funding. The implementation of strict Know Your Customer procedures have to be implemented. Banks build their KYC policies incorporating four main elements including:

  • Customer policy
  • Customer identification procedures (data collection, identification, verification, politically exposed person/sanction lists).
  • Risk assessment and management (due diligence, part of the KYC process)
  • Continuous monitoring and record-keeping

The process includes verifying customer identity using documents, including government-issued documents. 

Keeping information Up-to-date

To be able to verify customers, the data has to be up-to-date. A customer of a bank from 2018 may now be part of some sketchy activities and continuous monitoring helps the bank achieve that. According to surveys, 58% of all businesses rely on outdated data for verifying customer identities. 46% of businesses reference data that is not accurate and comes from different inconsistent sources.

Costs are Going Up For KYC Verification

Until there’s a standardized process available worldwide, the costs incurred by businesses for KYC verification will keep on growing. During the Covid-19 pandemic, the cost of Know Your Customer verification for some companies grew at a rate of 170%.

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Customer Onboarding: Providing Seamless KYC and User Experiences

customer onboarding

As a business, you’ve built your marketing campaigns and you have interested buyers ready but your customer onboarding process isn’t up to the mark and it’s hard for your business to acquire new customers. The customer onboarding process needs to be efficient and seamless. Whatever the reason, you won’t be able to grow your business without having a proper customer onboarding process.

According to reports, before the Covid-19 pandemic customer account opening process was the make or breakpoint in the relationship for a customer with a brand. That situation is even worse when firms were forced to shift to online methods.

The online sign-up process may seem simple at first, but the choices that a business makes regarding the customer onboarding process make the shape of the process. Finding and implementing ideal technological solutions are often the difference between success and failure. 

Providing a seamless onboarding process to the customer increases confidence and trust while building a great brand reputation. 

Customer Onboarding and KYC

For various organizations, performing Know Your Customer is a vital step in customer onboarding. While KYC isn’t a legal requirement for every business, it still helps in preventing fraud and verifying customer identities. A business should be aware of whom they are doing business with and what kind of risk they pose to the business. 

Sadly, if not carefully considered and optimized, KYC can lead to an onboarding experience that’s slow and tedious. An imperfect process often results in an increased customer drop-off rate. 73% of all customers have stated that the increase in intolerant poor experiences will force them to switch to another business with a better onboarding process. 

So what can an organization do that balances the need for security and speed while onboarding customers. The first thing to do is to use a risk-based approach, different customers have different needs. So being able to handle new clients the same way isn’t ideal. Understanding the different risk levels customers pose and adapting the onboarding requirements to fit specific scenarios offer better results. 

Document verification technologies can be used to verify customers. Verifying ID documents offers a certain level of secure ID verification for businesses.

You need to consider which technologies make sense when onboarding customers in specific situations. Having various options to verify customers and optimizing the workflows to meet the needs of the customers is the best way to enhance the customer onboarding process. Using deep data analysis, ID verification technologies, online document verification tools, and manual verification intelligence can lead to maximum conversion rates and enhanced ROI. 

Improving Customer Experience during Onboarding

Even the smallest of steps count while eliminating friction from the customer onboarding experience. Some common measures to improve the customer onboarding experience include:

1. Minimizing Data Collection

Most customers aren’t too comfortable with sharing their personal information with businesses. Banks, financial institutions, and other businesses need to carefully consider which information they need from the customers. The more information you ask from the customers, the fewer chances are a customer to stick around. Businesses also have to consider the complex set of data privacy laws, the more data they collect, the more risk they face of going through a data breach. Also, managing huge amounts of data isn’t cheap. 

Ask for the really necessary information. Firms can survive without asking for non-essential data from onboarding customers. 

2. Reducing Onboarding Time

 According to a survey, banks in the USA take up to 2 weeks to successfully onboard a new customer. To reduce the onboarding time and eliminate friction from the process, go through the onboarding process. Ask various members of your team to go through the process to figure out the major problem points. For most banks and financial institutions, this step can reduce the drop-off rate incredibly.

3. Measuring Benchmarks

It’s just not enough to go through the onboarding process once and forget about it. As a business, you should track the performance of the onboarding process. Measuring the success and failure points of your customer onboarding process can help your business get better success. Keep an eye out for metrics such as form abandonment and conversion rates. 

You should also monitor the backend process to reduce false positives and the rate of fraud. Analyze how effective your customer verification process is.

4. Optimizing Experience for Different Markets

Businesses need to understand the market in which they operate. Having an insight into the target market can help in optimizing a customer onboarding process based on customer behavior and industry trends. Different audiences have unique expectations from an onboarding process. Even something as small as asking for additional information can lead to instant customer drop-off. 

5. Providing a Safe and Secure Process

More than 70% of all customers consider security as the most crucial part of any account opening process. With the growing rate of fraud across industries, customers are wary of opening new accounts online. To ensure a customer has the best onboarding experience, brands have to establish a certain degree of trust in the process. 

Organizations need to offer the right trust signals and should have robust technologies set in place to detect and prevent suspicious activities early on. 

How does DIRO Assist in Customer Onboarding Experience Enhancement?

Manually onboarding customers is time-consuming, ineffective, and incredibly tough because of the pandemic. Businesses need to go digital and provide a smooth, frictionless onboarding experience to customers. 

With the integration of technologies in manual workflow, organizations can streamline and strengthen the overall process. DIRO’s online document verification software provides instantaneous document verification. With DIRO online document verification tool, businesses can verify customers from all over the world as it verifies 7000+ document types.

DIRO cross-verifies document data from the original web source, thus eliminating the use of fake and forged documents by 100%. It also provides 100% proof of authentication backed up by verifiable credentials. By using DIRO online document verification software, firms can add an element of security and speed to their customer onboarding process.