The present fraud climate should serve as a strong reminder to businesses of all sizes that identity verification has vital importance. As the pandemic progressed, more actions were conducted online, which resulted in a frenzy of fraud. Last year, the Consumer Sentinel Network of the Federal Trade Commission (FTC) received nearly 1.4 million reports of identity theft, more than quadruple the number of occurrences recorded in 2019. Poor or non-existent identification verification in online retail or financial services can cause chaos in people’s lives.
While introducing friction in the form of identity verification may seem paradoxical, customers have high expectations when it comes to their online safety. According to the findings of a FICO report on COVID-induced digital transformation in financial services, 62 percent of U.S. respondents expect to be required to prove their identity when opening an account digitally, and 42 percent expect to be required to set up biometric identification, indicating that the combination of these factors will result in some major trends of VPN download in 2022.
More Regulations will be implemented:
The pandemic’s influence on physical currency transactions and traditional banking has been an unforeseen side effect. Due to public health concerns about currency handling, there has been a global shift toward electronic forms of payment. As a result, established money-laundering supply lines have been thrown into disarray. Money launderers have responded by innovating and utilizing computerized payment methods. Peer-to-peer technologies are a feasible target for unscrupulous actors looking to transfer money obtained through deception.
As illustrated by the Pandora Papers released a few months ago, we continue to see the consequences of unscrupulous people committing financial crimes. The present compliance procedures are unable to stop the flow of laundered funds, and criminals continue to use loopholes to perpetrate fraud and avoid paying taxes. KYC verification and Anti-Money Laundering (AML) regulations will continue to evolve to keep pace with technological advancements. The 6th Anti-Money Laundering Directive (6AMLD) addresses cybercrime for the first time, naming it as a predicate offense.
Tackling the fraudsters:
Bad actors are using a variety of methods to steal personally identifiable information (PII), including creating fake domains that look like real brands and posting scams on social media that request sensitive data and payment information, which is then exploited to create synthetic identity or make fraudulent purchase, respectively. Fraudsters acting as courier services or border control officials have also been known to demand money in exchange for clearing parcels for delivery. During the epidemic, there were twice as many new online consumers as there had been previously. These less tech-savvy customers use weaker passwords, take fewer security precautions, and are more susceptible to Account Takeover assaults.
For online businesses, the last 20 months or so have brought a plethora of chances for customer acquisition and expansion, regrettably, these potential have been paired with new and rising fraud and identity theft dangers. The increase in internet activity has undoubtedly empowered and inspired bad actors to be more creative. To develop the foundation of trust that is necessary for modern digital transactions, the ecommerce industry must use rigorous identity verification mechanisms. Furthermore, 80% of respondents believe that internet sites have a responsibility to assist in the reduction of cybercrime by utilizing appropriate identity verification procedures. This will not only help keep scammers away, but it will also serve as the foundation for future trustworthy customer relationships.
Taking security measures to gain customer trust:
People want their online experience to be both secure and convenient, according to our research, and they acknowledge that technological improvements play a significant role in this. Indeed, 84 percent of consumers believe businesses should use AI and automation to protect against sophisticated fraudsters, 72 percent feel safe when behavioral analytics, such as AI-enabled voice and typing speed analysis, is used, and more than half (52 percent) of people are more likely to trust a brand that provides high-quality fraud protection. Simply said, if a customer has issues about the validity of an identity verification process, they may abandon the account creation process and refuse to conduct business with the company.
A layered approach to compliance and AML standards is required when onboarding users or transacting. A layered strategy, in essence, integrates a variety of verification services to boost acceptance rates for legitimate clients while also identifying bad actors or fraud culprits. Organizations can have complete flexibility in their AML and KYC compliance depending on the type of business or service and at each point of the client journey by using a layered and risk-based approach and tapping into varied data sources.