Pratyush Chandramadhur, Chief Business Officer, AuthBridge Research Services, 0
As the financial sector continues to evolve, so do the methods employed by nefarious actors to engage in illicit activities such as money laundering.
This evolving challenge not only undermines the integrity and stability of the financial system, but it also erodes public trust in financial institutions and businesses facilitating the commission of other serious crimes such as drug trafficking, corruption, and terrorism.
Understanding the New Vectors Enabling Fraud and Laundering
Virtual Currencies
With new technologies and norms around transactions, new fraud threat vectors have emerged for the BFSI landscape. One trend of particular concern is the increased use of virtual currencies, such as Bitcoin, for money laundering. These currencies allow for the anonymous movement of funds across borders and evade traditional financial controls.
Online Marketplaces
The use of online marketplaces, such as those on the dark web, for money laundering is also on the rise. These platforms enable the anonymous sale of illicit goods and services and the use of virtual currencies for payment.
VPNs as Catalysts
Besides these two emerging trends compiling at the top of shell companies and social media strategies for laundering, fraudsters are using Virtual Private Networks to hide their real IP addresses and location, making it difficult for authorities to trace their activities.
Card not Present Fraud
One of the prevalent forms of money laundering is the exploitation of credit card information through fraudulent transactions. This type of illicit activity can prove challenging to detect, as cardholders may not be immediately aware of the unauthorized transactions until they receive their credit card statement.
One example of money laundering using a credit card could involve an individual using another person's credit card for a transaction outside of India, while the cardholder is still in India. This is called ‘card not present’ (CNP) fraud, which works on the principle of data hijacking.
In this scenario, the money launderer could obtain the credit card information through a variety of means, such as skimming, phishing, or a data breach. They could use the stolen information to make purchases or withdrawals from the cardholder's account, while the cardholder is still in India and unaware of the fraud.
How Biometric Technology Augments KYC to Catch Fraudsters Quicker
To combat these evolving forms of money laundering, Banks and the Financial Services industry are constantly exploring new solutions. While digitizing banking
products have proven to be useful, and time-saving for the customers, biometric authentication has really helped organizations with fraud prevention.
The Nuances of Digital KYC for Fraud Prevention
Regarding Video KYC, during call, the customer is asked to show their government-issued ID and answer security questions to confirm their identity. A facial liveness check allows institutions to verify the customer's identity in real-time and detect any potential fraud.
Digital KYC makes use of advanced technologies such as optical character recognition and biometric verification to confirm the identity of the customer, thereby making it more challenging for criminals to utilize anonymous or fictitious identities for money laundering. Additionally, digital KYC enables remote completion of the KYC process, thereby reducing the risk of money launderers opening accounts before detection.
The Nuances of Biometric Verification that Elevate KYC
Biometric verification confirms the identity of the customer using biological markers that cannot be replicated, thereby making it near-impossible for criminals to utilize anonymous or fictitious identities for money laundering. Additionally, digital KYC, powered by biometrics, enables easy and robust matches with OVD’s (Officially Valid documents), helping with remote completion of the KYC process, thereby reducing the risk of money launderers opening accounts before detection.
Another way in which biometric authentication KYC can help to catch fraudsters is through the detection of patterns of suspicious activity. By creating a more comprehensive and accurate customer profile through biometric verification, companies can identify patterns of behaviour that may indicate fraudulent activity.
For example, if a customer's account is being accessed from multiple locations at once, or if large amounts of money are being transferred to unfamiliar accounts, these could be red flags for potential fraud.
Finally, biometric authentications can also help to prevent account hijacking, where fraudsters gain unauthorized access to a customer's account and make transactions without their consent. By using biometric data for the authentication of every transaction that exceeds a certain ticket size, companies can ensure that only the account holder can access the account and process payments, reducing the risk of unauthorized access.
By utilizing biometric technology, financial institutions and other regulated entities can further enhance their efforts to comply with AML regulations and effectively combat money laundering. Needless to say, it has become a turbocharger for KYC processes, ensuring optimal results for any financial enterprise when it comes to fraud detection and prevention.
As the financial sector continues to evolve, financial institutions and regulatory authorities must stay vigilant and adapt their methods to detect and prevent money laundering.
The Nuances of Digital KYC for Fraud Prevention
Regarding Video KYC, during call, the customer is asked to show their government-issued ID and answer security questions to confirm their identity. A facial liveness check allows institutions to verify the customer's identity in real-time and detect any potential fraud.
Digital KYC makes use of advanced technologies such as optical character recognition and biometric verification to confirm the identity of the customer, thereby making it more challenging for criminals to utilize anonymous or fictitious identities for money laundering. Additionally, digital KYC enables remote completion of the KYC process, thereby reducing the risk of money launderers opening accounts before detection.
By utilizing biometric technology, financial institutions and other regulated entities can further enhance their efforts to comply with AML regulations and effectively combat money laundering
The Nuances of Biometric Verification that Elevate KYC
Biometric verification confirms the identity of the customer using biological markers that cannot be replicated, thereby making it near-impossible for criminals to utilize anonymous or fictitious identities for money laundering. Additionally, digital KYC, powered by biometrics, enables easy and robust matches with OVD’s (Officially Valid documents), helping with remote completion of the KYC process, thereby reducing the risk of money launderers opening accounts before detection.
Another way in which biometric authentication KYC can help to catch fraudsters is through the detection of patterns of suspicious activity. By creating a more comprehensive and accurate customer profile through biometric verification, companies can identify patterns of behaviour that may indicate fraudulent activity.
For example, if a customer's account is being accessed from multiple locations at once, or if large amounts of money are being transferred to unfamiliar accounts, these could be red flags for potential fraud.
Finally, biometric authentications can also help to prevent account hijacking, where fraudsters gain unauthorized access to a customer's account and make transactions without their consent. By using biometric data for the authentication of every transaction that exceeds a certain ticket size, companies can ensure that only the account holder can access the account and process payments, reducing the risk of unauthorized access.
By utilizing biometric technology, financial institutions and other regulated entities can further enhance their efforts to comply with AML regulations and effectively combat money laundering. Needless to say, it has become a turbocharger for KYC processes, ensuring optimal results for any financial enterprise when it comes to fraud detection and prevention.
As the financial sector continues to evolve, financial institutions and regulatory authorities must stay vigilant and adapt their methods to detect and prevent money laundering.