Home Slider How to Prevent Fraud in an Increasingly Globalised World

How to Prevent Fraud in an Increasingly Globalised World

by internationalbanker

By Barley Laing, UK Managing Director, Melissa

 

 

 

 

Financial institutions around the world are having to review and verify a greater range of identification (ID) documents than they traditionally have when onboarding customers, as migration increases and globalisation continues at pace. According to the Organisation for Economic Co-operation and Development (OECD), there was a 14-percent increase in migrants to their member countries in 2022, compared with pre-pandemic 2019. This backs up other research from the United Nations (UN) highlighting that nearly 4 percent of the world’s population were migrants in 2020—three times more than in 1970.

Among the fastest-growing migrant segments are “digital nomads”, taking advantage of remote-work policies and improving high-speed internet access to toil away while travelling the world. The number of digital nomads grew by 220 percent in the last three years to 35 million. This increasing migration requires financial institutions around the world to review and verify a growing number of unfamiliar ID documentation formats as part of their remote onboarding and/or manual ID-verification processes.

Simultaneously, fraud is on the rise as payments and transactions increasingly take place online, with 1.4 million fraud cases occurring in the United Kingdom in the first half of 2023, according to UK Finance.

Source an eIDV platform

The best way to undertake ID verification in a world experiencing these levels of migration growth and fraud is to embrace an electronic identity verification (eIDV) platform. These can be accessed via any delivery mechanism—cloud, API (application programming interface) and SaaS (software as a service)—and scaled up or down according to the user’s needs.

These “always on” tools can, in real-time, crosscheck the names, addresses, email addresses and phone numbers provided by prospective customers during remote onboarding—providing a good customer experience while preventing fraud. For best results, it’s recommended to source an eIDV platform with access to billions of consumer and business records from reputable sources around the world, such as government, utility and credit agencies. This ensures effective ID verification and, therefore, efficient customer-onboarding service wherever the user is in the world.

When compared to manual checks, using such a tool is considerably quicker, more accurate and more cost-effective for undertaking ID verification and preventing fraud. This technology requires no additional staffing or training costs and minimises human-error risks.

Deliver clean data first

Before sourcing an eIDV platform, it’s advisable to make sure that you have clean and up-to-date customer data. Taking this first step—for example, matching a name to the right address—gives you confidence in the accuracy of your data and that your customers are who they say they are. Putting processes in place that deliver ongoing data hygiene, such as an address lookup and autocomplete service, and gather accurate address data in real-time at the onboarding stage is invaluable. By delivering address validation, these tools support ID verification. Additionally, it’s important to recognise that such data quality and cleaning services are more cost-effective methods than using eIDV to pick up any inaccuracies in customer-contact data.

Full-service ID verification

It is important to take into account that some eIDV platforms offer full-service identity verification with a global reach. These include data on know your business (KYB), sanctions, politically exposed persons (PEPs) and relatives and close associates (RCAs), along with adverse media screening.

KYB checks are crucial 

Delivering KYB screening enables organisations to fully understand the risks posed by new and existing business customers and suppliers, and thereby helps to prevent fraud from occurring. This is beneficial because fraud is frequently committed by shell companies or organisational structures that don’t really exist. Additionally, KYB checks hinder financial crimes, such as money laundering and terror financing, that can cause substantial reputational damage.

It is worth emphasising that undertaking best-practice due diligence by delivering KYB screening not only reduces opportunities for fraud but also has a number of other benefits. These include the ability to personalise communications, improve service delivery and perfect overall user experiences to provide competitive advantages. All these factors are important, particularly as inflation remains high and economic uncertainty continues.

Integrated sanctions data

To ensure you are up to speed with the latest sanctions data and regulations, obtaining an up-to-date sanctions list is key. It may sound obvious, but it’s surprising how many of those in financial services don’t have access to one, despite the legal requirement to screen for sanctions.

The list should be accessed as part of an automated eIDV platform that collects and synthesises sanctions data from a wide range of trusted sources worldwide. It also needs to scan for updates on sanctions data continually and deliver them daily in real-time. This automated approach is a much more efficient and accurate way to implement sanctions screening. 

Think PEPs and RCAs

For a wider best-practice approach to sanctions checks—to protect your organisation against potential fraud and avoid having  customers that can damage your reputation—it’s vital to obtain PEP and RCA data from around the world. These groups have a tendency to be involved with or drawn into crime because of the nature of their roles or relationships with those in authority positions. It is vital to know who they are because if they abuse their positions to defraud your organisation, not only will there be monetary costs, but the situation could cause significant reputational damage. In the UK, financial organisations are legally obliged to undertake enhanced checks of both domestic and foreign PEPs.

It is worth noting that higher-risk PEPs, those who are at senior levels, could pose some risk after leaving office due to their activities and relationships while in their roles. As a result, undertaking enhanced due diligence on these individuals for longer is recommended.

Automated adverse media screening

Adverse media screening is an important part of best-practice customer due diligence (CDD) and anti-money-laundering (AML) processes. The automated technology that powers it enables those in financial services to keep up to date on the latest worldwide news and alerts in real-time on any arrests, court cases or convictions against users of their services. These may be PEPs and RCAs, along with others who could have possible negative regulatory, financial or reputational consequences for their organisations.

Checking for negative news on an individual or business, even if they do not appear on any international watchlists, is vital to obtaining the most accurate risk profiles of those using your services. Additionally, such an approach supports best-practice due diligence for know your customer (KYC), KYB for possible suppliers and partners, and AML.

Conclusion

As the number of migrants grows rapidly and the world becomes more globalised, undertaking seamless, real-time ID checks via a full-service eIDV platform with a global reach is vital to prevent fraud and provide good customer experiences. The other option of undertaking costly manual checks using fragmented datasets from a variety of different sources lacking worldwide coverage is no longer fit for purpose to stop the growing scourge of fraud.

 

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