It shouldn’t have taken a global pandemic to realize the benefits of online verification

With the Covid-19 pandemic confining millions of US citizens to their homes, much of our day to day lives have had to move online, forcing businesses right across the country to adapt to new ways of working.

And while it is understandable that in order to continue to operate in the new normal, businesses are keen to shift to a digital model as soon as possible, moving to a remote way of working too quickly without ensuring compliance is up to scratch poses serious risks to the business.

Where firms are rushing to get their online working practices up and running but do not have online identity verification programs to match, they have inadvertently created a fertile ground for fraudsters.

As a result, there has been a dramatic increase in COVID-19-related scams as fraudsters target people and businesses when they are at their most vulnerable.

While some of the most high-profile scams have been targeted at consumers, there has also been a significant rise in fraud aimed at corporates, particularly, financial institutions.

Insider fraud

Sadly, one of the most prevalent types of financial crime to emerge during the pandemic is insider fraud. The economic crisis has put many people under huge financial pressure, and this, combined with the uncertainty and fear makes people more likely to be complicit in financial wrongdoing. Combine this financial need with new remote practices - which have made company policies more difficult to enforce than usual and given employees more access to company systems than they would usually have - and you have the motive and the opportunity for employees to commit fraud.

Payment fraud

Another issue with the separation of the workforce into isolated home working environments means the usual contact systems are not in place and often, vendors are more difficult to reach than usual meaning due-diligence procedures are often not as tight as they should be. Fraudsters know this, so are taking advantage by sending out fake invoices that appear to be legitimate and from regular, trusted, vendors. Therefore, if those organizing invoice payments are unable to complete their usual checks, they may actually be paying out funds to fraudsters. 

New customers

One of the biggest risks to businesses that have moved to a remote working environment is customer onboarding. FinCen requirements are that due diligence must be performed on all new customers, so any financial institutions still relying either fully or partly on manual, face-to-face KYC checks to verify the identity of their customers will struggle to meet their obligations.

This then poses a huge risk to the business, as criminals looking to use your financial institution to launder their dirty money are much more likely to be able to open an account with a fake ID or commit impersonation fraud in the current home working environment.

An online solution for an online world

Given the increased fraud risk Covid-19 and the switch to remote working has brought, it is vital that businesses do all they can to mitigate the threat.

Online identity verification has been recognized as the most reliable and robust way to complete the required checks on new customers and employees for some time; now it has also become the only realistic solution for meeting AML regulations under the current restrictions.

Digital platforms can run all the required onboarding checks remotely to verify identity - including screening against Sanction and PEP lists - and then host all the data and monitor it on an ongoing basis, meaning all regulatory requirements can be met, easily, online.

 The most cutting-edge platforms will now also offer facial recognition checks for an added layer of certainty.  The very latest techniques perform an algorithmic check on the person’s driver's license, passport, or other ID and then capture a 'real-life' image via a Selfie Liveness Video (SLV). This allows the system to compare the ID with the ‘real person’ to ensure the information provided is genuine. Some platforms can them look at Digital Elements (DEs), such as email address and phone number to assess the overall fraud risk and provide a fraud indicator score for your onboarding program.

The last year has seen more financial institutions turn to digital onboarding and AML services than ever before. For many, the switch was forced by the pandemic, as it offered the only solution to remote customer onboarding, but the result is that they now have more robust systems in place than before the crisis.

With tightening AML rules and FinCen pushing for financial institutions to adopt digital compliance solutions, it is likely that firms will be pushed to incorporate new technology for security and move their KYC and compliance programs online, so any who have already made the switch are well ahead. It is just a shame that it has taken a global pandemic for many to realize the benefits.