Event overview: A forum for collaboration

The Marketplace Risk Global Summit 2025 featured a packed agenda with three simultaneous tracks, offering attendees a variety of panel discussions and presentations.

While the event drew a European audience, the themes were globally relevant. A wide array of marketplace sub-sectors were represented, highlighting the universal nature of the risks discussed.

Core themes: Trust, fraud, and collaboration

Several recurring themes anchored the conversations throughout the summit. These topics reflect the primary challenges and opportunities for marketplaces today.

• Safeguarding and trust: Building and maintaining user trust is more critical than ever. This goes beyond simple compliance to encompass proactive safety measures and clear, consistent policies.
• The evolution of fraud: As technology advances, so do the methods of fraudsters. The discussions emphasized that fraud is a dynamic threat, requiring constant adaptation and sophisticated multi-layered defenses.
• Data sharing and collaboration: A powerful message emerged: no single organization can fight fraud alone. Cross-sector collaboration and secure data sharing are essential to staying ahead of bad actors.
• Balancing friction and security: Marketplaces must find the right equilibrium between robust fraud controls and a smooth user experience. Too much friction can deter genuine users, while too little can invite abuse.
• The role of AI: While “AI” was a prominent buzzword, many speakers stressed that the focus should be on practical application. The consensus leaned toward a model where AI supports human decision-making, rather than replacing it, automating predictable tasks to free moderators for higher-value work.
  
  

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Highlights from key sessions

The summit’s agenda was filled with insightful presentations from industry leaders. These sessions provided a deeper look into the strategies and technologies shaping marketplace security.

Amazon on the five pillars of trust

Rebecca Mond, Head of External Relations for Customer Trust at Amazon, delivered a compelling keynote on building a scalable foundation for customer protection. She outlined five pillars that form the architecture of trust:

1. Prevention: Implementing proactive controls, such as robust identity verification (IDV) for sellers and monitoring for suspicious account activity.
2. Continuous monitoring: Using automated systems to detect fraud, abuse, and unsafe products in real-time.
3. Clear & consistent enforcement: Taking decisive action against bad actors, including removing sellers, blocking accounts, and seizing funds to protect the platform’s integrity.
4. Collaboration: Working with law enforcement, other companies, and industry groups to combat organized fraud and share best practices.
5. Customer education: Providing customers with clear, accessible information on safety and scam trends.

Mond emphasized that prevention is key, as it reduces the need for downstream enforcement actions.

Harnessing intelligence from the deep & dark web

An insightful session featured Brittany Allen of Sift and Anna Collier of Fanvue, who spoke about using deep and dark web intelligence to proactively fight fraud. They explained how forums and chat groups on platforms like Telegram are used by bad actors to share methods for bypassing a platform’s security, such as its KYC process. By monitoring these channels, Fanvue was able to identify and patch vulnerabilities before they could be widely exploited. This session underscored the importance of external intelligence in a comprehensive fraud prevention strategy.

Looking ahead: The future of marketplace risk

The Marketplace Risk Global Summit 2025 made it clear that building a safe and trustworthy online environment is a collective responsibility. As fraud becomes more organized and technologically advanced, marketplaces must move beyond siloed approaches and embrace collaboration.

The insights shared in London emphasize a strategic shift toward proactive prevention, automated detection, and intelligent enforcement. By investing in the right technology, fostering cross-industry partnerships, and maintaining clear and consistent policies, platforms can protect their users and their reputation in an increasingly complex digital world.

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What is Address Identification?

Address Identification refers to the process of verifying an individual’s current residential address using documents or trusted data sources. It’s often a core component of Know Your Customer (KYC) and Customer Due Diligence (CDD) processes—especially under Anti-Money Laundering (AML) legislation.

Acceptable Proof of Address documents

In the UK, the Government’s Proof of Identity Checklist outlines acceptable documents for proving both identity and address. For proof of address, these include:

• Utility bills (dated within the last 3 months)
  
• Bank or building society statements
  
• Council tax bills
  
• Mortgage statements
  
• Tenancy agreements
  
• Government-issued letters
  

Importantly, the document must clearly show the customer’s name, current address, and a recent date to be valid.

Why is Address Identification so important?

1. Regulatory compliance

For businesses operating in regulated sectors—like banking, payments, insurance, or online gambling—address identification isn’t optional. Under the UK’s Money Laundering Regulations, firms must conduct risk-based identity verification, including gathering evidence of a customer’s residential address.

Financial institutions are expected to assess the credibility of the documents and implement ongoing monitoring to detect inconsistencies or changes in customer details.

The FCA Handbook reinforces this obligation. For example, when opening a new account, a firm must take reasonable steps to ensure it has verified the address of the account holder to prevent fraud or misuse of financial services.

2. Fraud prevention

Fraudsters may use stolen or synthetic identities to open accounts, access financial services, or launder money. Address identification provides an extra layer of verification that deters fraud and makes it harder to impersonate real individuals.

Especially in sectors like fintech or crypto—where onboarding happens online and at scale—automated address verification is essential to flag suspicious behavior early.

3. Customer trust & operational efficiency

Verifying someone’s address helps businesses establish trust and reduce downstream issues like failed transactions or regulatory breaches. When done digitally, address checks also speed up the onboarding process and reduce friction—leading to better user experiences.

Real-world examples by industry

• Banking & Payments: Customers must provide proof of address to open current or savings accounts, apply for loans, or access credit. According to Citizens Information, banks require both photographic ID and proof of address under EU regulations.
  
• Insurance: Confirming address ensures policyholders reside in eligible regions and helps prevent false claims.
  
• Online Gambling: Operators must verify user location and age to comply with regional licensing rules and protect underage users.
  
• eCommerce & Marketplaces: Address checks help prevent fraudulent returns, account takeovers, or delivery scams.
  

How Address Verification works in the digital age

Modern identity verification platforms simplify the process by allowing users to upload documents or verify their address through secure data lookups. Advanced solutions may include:

• Optical Character Recognition (OCR) to extract data from scanned documents
  
• Liveness detection and biometrics to match documents to users
  
• Geolocation and IP analysis to ensure consistency
  
• AI-based fraud detection to flag anomalies
  

This layered approach enhances security while minimizing manual review and onboarding delays.

Key features of Veriff PoA include:

• Rapid results: response with less than 30 seconds, improving onboarding speed and reducing user drop-off
• Global reach: recognizes documents in over 40 languages across major global scripts, including Arabic, Cyrillic, Japanese, and Latin.
• Document tamper detection: advanced, multi-layered checks detect signs of tampered, fake, or reused documents to reduce the risk of fraud.
• Non-document-based verification: this option verifies addresses against trusted third-party databases, reducing the need for document uploads.
• Integration flexibility: the solution can be incorporated into existing onboarding processes or used for standalone checks.

“As industries race toward digital transformation, proof of address checks often remain manual and slow, yet it’s an important step in building trust and meeting regulations,” explained Oana Barbacaru, Senior Product Manager at Veriff. “Our new AI-based solution delivers a decision in less than 30 seconds, with top-tier accuracy and built-in fraud prevention. It’s reliable, fast, reduces friction – built for the future of KYC,” she added.

Oana Barbacaru, Senior Product Manager at Veriff: 

“Our new AI-based Proof of Address solution is reliable, fast, reduces friction – built for the future of KYC.”

Veriff PoA can be applied to use cases such as:

• Customer onboarding in banking, fintech, and gaming
• Right-to-work checks and employee onboarding
• User verification for home-sharing and gig platforms
• Address confirmation for insurance policies and risk assessments
• Location-based compliance in gambling and gaming

Final thoughts

Address identification may seem like a basic step—but in regulated industries, it’s foundational. It strengthens compliance, deters fraud, and builds the trust needed for safe digital interactions.

As financial crime grows more sophisticated, so must your verification tools. Getting address verification right isn’t just about ticking boxes—it’s about protecting your business and your customers.

FAQs:

1. Can a driver’s license be used as proof of address?

In some countries, a driver’s license is accepted as both photo ID and proof of address. However, in many regulated industries, you may still be required to provide an additional document—such as a utility bill or bank statement—for separate address verification.

2. Why was my proof of address document rejected?

There are several common reasons for rejection:

• The document is too old (typically older than 90 days)
  
• The address is incomplete or illegible
  
• The name on the document does not match the ID
  
• The document type is not accepted (e.g., handwritten letters or mobile screenshots)
  

Always check the specific requirements of the institution you’re dealing with.

3. Is a digital document or PDF acceptable?

 Yes, many businesses and verification platforms accept digital documents, such as PDF bank statements downloaded from your online banking portal. However, screenshots may be rejected if they can’t be authenticated.

4. How often do I need to provide proof of address?

 You typically need to provide proof of address when:

• Opening a bank account
  
• Registering with a financial service
  
• Applying for credit or insurance
  
• Updating your KYC records
  

In regulated sectors, firms may also request updated proof periodically to comply with ongoing monitoring obligations.

Looking to simplify address identification for your business?

Discover how Veriff helps regulated industries stay compliant and onboard customers faster with seamless identity and address verification.

Explore our solutions

The post What is Address Identification and why it matters for regulated industries? appeared first on Veriff.

This guide provides an actionable Enhanced Due Diligence Checklist and shows how Veriff helps streamline, scale, and secure your EDD process.

What is Enhanced Due Diligence (EDD)?

Enhanced due diligence process is a deeper level of customer vetting used to identify and monitor high-risk clients or transactions. It builds on standard due diligence by adding layers of verification, monitoring, and risk assessment—especially important for:

• Politically Exposed Persons (PEPs)
• Clients in high-risk jurisdictions
• Crypto or gambling users
• Complex corporate structures
• Unusual transaction patterns

Failing to implement EDD properly can result in regulatory fines, reputational loss, and exposure to serious fraud.

Enhanced due diligence process is a deeper level of customer vetting used to identify and monitor high-risk clients or transactions. It builds on standard due diligence by adding layers of verification, monitoring, and risk assessment—especially important for:

• Politically Exposed Persons (PEPs)
• Clients in high-risk jurisdictions
• Crypto or gambling users
• Complex corporate structures
• Unusual transaction patterns

Failing to implement EDD properly can result in regulatory fines, reputational loss, and exposure to serious fraud.

Benefits of Enhanced Due Diligence

Enhanced Due Diligence (EDD) offers numerous benefits to financial institutions and organizations. Some of the key advantages of EDD include:

EDD helps identify and mitigate risks associated with high-risk customers or transactions, reducing the likelihood of financial crimes and reputational damage. By thoroughly vetting high-risk entities, financial institutions can proactively address potential threats before they escalate.

EDD ensures compliance with anti-money laundering (AML) regulations and financial crime prevention laws, reducing the risk of fines and penalties. Adhering to these stringent requirements demonstrates a commitment to regulatory standards and helps avoid costly legal repercussions.

Enhanced Due Diligence (EDD) provides financial institutions with a deeper and more comprehensive understanding of their customers and their transactions. By analyzing detailed customer data, EDD allows these institutions to make well-informed decisions about their business relationships. This level of transparency not only fosters trust but also enables more precise risk assessments, ensuring that institutions can better evaluate the potential risks associated with their customers and partners.

One of the key benefits of EDD is its ability to help prevent money laundering and terrorist financing, both of which pose significant threats to the financial sector. By identifying unusual or suspicious activities early in the process, EDD reduces the risk of financial losses and safeguards against reputational damage. Institutions can act quickly to address potential threats, protecting their assets and maintaining compliance with stringent regulatory requirements.

In addition to mitigating risks, EDD plays a vital role in building trust with customers. By demonstrating a clear commitment to transparency, security, and compliance, financial institutions can enhance their credibility in the eyes of their clients. This trust is critical for establishing and maintaining long-term business relationships, as well as fostering customer loyalty in an increasingly competitive market. Ultimately, EDD not only ensures regulatory compliance but also supports the growth and integrity of financial institutions by creating a secure and trustworthy environment for their customers.

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Your essential enhanced Due Diligence checklist

Here’s what every EDD program should include to mitigate risk and build long-term trust:

A well-defined diligence process is crucial for assessing high-risk customers and ensuring compliance with regulations.

1. Initial risk profiling

• Conduct user risk scoring based on jurisdiction, industry, transaction patterns
• Include device, behavioral, and fraud analytics from the start

2. PEP & Sanctions screening

• Real-time screening against OFAC, UN, HMT, EU, and other global watchlists
• Use tools that continuously monitor changes, not just point-in-time checks

3. Adverse media screening

• Scan 150+ million sources for negative news (fraud, financial crime, political exposure)
• Enable auto-flagging for predicate offenses or media triggers

4. Document and Identity Verification

• Require ID, Proof of Address, and business registration documents
• Validate document authenticity with AI-powered tools and assisted image capture
• Support 12,000+ ID types in 48 languages for global verification

5. Source of funds / Wealth assessment

• Request and verify bank statements, employment records, corporate ownership
• Use network/device analytics to uncover inconsistencies in submitted data

6. Ongoing monitoring and reassessment

• Re-screen high-risk clients periodically
• Implement biometric re-authentication to validate returning users
• Monitor transaction activity for anomalies in real-time

Additionally, implement enhanced due diligence procedures to manage high-risk customers, particularly politically exposed persons (PEPs), by using a risk-based approach to determine the necessary information to collect.

How Veriff supercharges your EDD process

With Veriff, you can turn your enhanced due diligence process into a scalable, reliable compliance engine—powered by automation, biometric intelligence, and real-time risk signals:

Veriff offers comprehensive identity verification and AML screening solutions to help businesses ensure compliance and reduce fraud. With access to a global library of over 12,000 identity documents across 230+ countries, Veriff combines advanced fraud detection, assisted image capture, and passive liveness detection to streamline user onboarding while minimizing friction. Its AML tools screen users against global PEP, sanctions, and adverse media lists, with continuous monitoring to alert businesses of changes instantly. Additionally, Veriff scans over 150 million media sources for adverse media and background checks, building robust customer risk profiles. Customizable onboarding flows with omnichannel support allow businesses to tailor the user experience, adding branding and compliance-specific features as needed.

Customer identification and information

Customer identification and information are critical components of Enhanced Due Diligence (EDD). Financial institutions must gather and verify information about their customers, including:

Identity Verification:

Verifying the customer’s identity through government-issued documents, such as passports or driver’s licenses. This step ensures that the individual is who they claim to be and helps prevent identity fraud.

Address Verification

Verifying the customer’s address through utility bills or other documents. Confirming the address adds another layer of assurance and helps in tracking the customer’s location.

Source of funds

Verifying the source of the customer’s funds to ensure they are legitimate and not derived from illicit activities. This involves reviewing bank statements, employment records, and other financial documents to confirm the origin of the funds.

Ultimate beneficial ownership

Identifying the ultimate beneficial owner of the customer’s assets to prevent money laundering and terrorist financing. Understanding who ultimately controls the assets helps in assessing the true risk associated with the customer.

Transaction monitoring

Monitoring the customer’s transactions to identify suspicious activity and prevent financial crimes. Continuous transaction monitoring allows financial institutions to detect and respond to unusual patterns in real-time.

High-risk entities and Enhanced Due Diligence

High-risk entities, such as Politically Exposed Persons (PEPs) and companies operating in high-risk countries, require Enhanced Due Diligence (EDD) to effectively reduce the risk of financial crimes like money laundering, fraud, and terrorist financing. Financial institutions must take a proactive approach to identify, assess, and mitigate risks associated with these entities. Here are the critical steps involved:

Financial institutions need to perform thorough risk assessments to identify potential risks tied to high-risk entities. This process involves evaluating the entity’s background, including their ownership structure, business activities, and geographical location, to determine their level of risk exposure. High-risk countries, for example, may have weak regulatory frameworks or higher corruption levels, which increases the likelihood of financial crimes. Assessments should also consider the nature of the entity’s transactions and their potential for misuse by bad actors.

Collecting comprehensive data about high-risk entities is essential for building a detailed risk profile. This includes analyzing the entity’s business activities, key relationships, sources of funds, and transaction histories. Financial institutions often need to go beyond standard due diligence by requesting documentation such as corporate records, ownership certificates, and explanations of transaction purposes. This deeper level of scrutiny ensures that no critical details are missed and helps identify potential red flags early on.

Transactions involving high-risk entities must be closely monitored to detect suspicious activity, such as unusual patterns, large sums of money, or transfers to jurisdictions with weak regulations. Continuous monitoring allows institutions to respond quickly to potential threats, flagging transactions that might indicate money laundering or other financial crimes. Advanced analytics and AI tools can assist in identifying patterns and anomalies that would otherwise go unnoticed, ensuring a more robust detection process.

To prevent money laundering and terrorist financing, financial institutions must implement stricter controls for high-risk entities. These include enhanced customer due diligence procedures, ongoing monitoring of accounts, and regular audits. Enhanced controls may also involve requiring additional approvals for high-value transactions or maintaining detailed reporting protocols. By putting these measures in place, institutions can safeguard the integrity of their financial systems and comply with regulatory requirements.

Overall, Enhanced Due Diligence is a vital component of any financial institution’s effort to maintain compliance and reduce exposure to financial crime risks. By adopting these rigorous practices, institutions can protect their reputation, build trust with their customers, and contribute to global efforts to combat illicit financial activities.

Best practices for successful Enhanced Due Diligence

To ensure successful Enhanced Due Diligence (EDD), financial institutions should follow best practices, including:

Implementing a risk-based approach

Implementing a risk-based approach to EDD, focusing on high-risk customers and transactions. This approach allows institutions to allocate resources effectively and prioritize the most significant risks.

Conducting regular risk assessments

Conducting regular risk assessments to identify potential risks and update EDD procedures accordingly. Regular assessments ensure that the institution’s risk management strategies remain current and effective.

Providing ongoing training

Providing ongoing training to employees on EDD procedures and best practices. Continuous education ensures that staff are well-equipped to identify and manage risks effectively.

Using technology

Using technology, such as automated risk assessment tools, to streamline EDD processes and improve efficiency. Advanced technologies can enhance the accuracy and speed of due diligence procedures, reducing the burden on compliance teams.

Maintaining accurate records

Maintaining accurate records of EDD procedures and results to ensure compliance with regulatory requirements. Detailed documentation is essential for demonstrating compliance during audits and regulatory reviews.

Veriff and Easygo/Stake: Streamlining player onboarding

Easygo, a global software development startup, faced challenges in verifying customer age and residency for its subsidiary, Stake.us. Initially, they relied on manual in-house KYC screening, which was labor-intensive and caused significant delays, with some customers waiting over a week for verification. By integrating Veriff’s automated identity verification solution, Easygo achieved near-real-time validation, eliminating backlogs and enhancing the customer experience. This implementation also effectively identified and removed fraudulent actors attempting to exploit the system.

This case study demonstrate the versatility and effectiveness of Enhanced Due Diligence, showcasing how Veriff’s solutions contribute to compliance, fraud prevention, and improved user experiences.​

The post Enhanced Due Diligence checklist: Strengthen your KYC process with confidence appeared first on Veriff.

The debate on age restrictions for minors

Australia has taken a step towards restricting social media access for minors due to concerns about its impact on their developing worldview. Similar debates are taking place in several U.S. states. While a store clerk or security guard might be able to estimate a person’s age at a glance, it’s not foolproof. Sometimes, a youthful-looking adult is mistaken for a minor, while a teenager with newly grown facial hair can slip past age filters.

So, the obvious question arises: could machines do this better than humans?

Where Veriff comes into play

Veriff skyrocketed in popularity by offering identity verification using video camera images. The user shows their ID in front of the camera, and Veriff’s platform cross-checks the visual data with information from the document. The system also includes a “liveness” test to confirm that a real, live person is present — all part of a process that takes just six seconds.

But what happens if an ID isn’t available, or if requesting it would reveal too much personal information? Aleksander Tsuiman explains the company’s approach to this challenge.

Using biometric data to estimate age

Tsuiman confirms that online age detection is entirely possible. AI can analyze our features well enough to estimate our age with surprising accuracy. But what are the most effective technologies for this? Does it rely on documents, facial recognition, or something else?

The general trend is toward using biometric data for both identity verification and age estimation. However, a combination of different checks and data points is more accurate and secure than relying solely on facial recognition. For example, if biometric data is supplemented with ID document checks, the likelihood of accurately determining a person’s age increases significantly.

Veriff’s technological developments

Veriff continues to expand its portfolio of biometric verification tools. Tsuiman notes that some exciting developments are in the works, and more details may be revealed next year. Currently, Veriff employs Biometric Authentication for repeat users who have already undergone a comprehensive identity verification process.

“While most people are honest, around 5-6% of all sessions involve fraudsters attempting to pose as someone else,” says Tsuiman.

The company’s verification process analyzes more than 1,000 different data points, including biometric and behavioral data, document information, and device and network details. If necessary, additional verification checks can be added upon a customer’s request.

The process is largely automated, with decisions typically made in about six seconds. If the automated system cannot reach a definitive conclusion, human reviewers step in, which may take more time. The demand for real-time responses has driven improvements in the service, reducing decision times from several seconds to just one second for repeat users undergoing biometric authentication.

Veriff is also developing an Age Estimation product. It’s a solution designed to enable rapid age verification with just a selfie — no ID required.

This tool is particularly useful for companies that want to ensure user safety (especially for minors) but prefer not to request ID documents due to privacy or ethical concerns. The system can be used in both virtual and physical settings, such as video game platforms, social media sites, dating apps, self-checkout purchases of age-restricted products, or entry to bars and nightclubs.

According to Tsuiman, Veriff also uses cross-session data analysis for fraud detection. This means that data from multiple verification sessions is analyzed to identify so-called “serial fraudsters.”

While most users are honest, about 5-6% of all sessions are flagged for fraudulent attempts to impersonate someone else (source: Veriff Identity Fraud Report 2025)

How does age verification ensure privacy and data security?

User privacy and security are paramount. People need to know why their data is being processed, who has access to it, and how it will be used.

Any form of personal data processing, including data collection, must have a lawful basis. For example, in most cases, the platform (like a social media network) is responsible for ensuring legal compliance since they control how the data is used.

Data security depends on the measures in place to protect confidentiality, integrity, and availability. Encryption during data transfer and storage, controlled internal access to data, and regular system testing are critical measures. Security protocols, policies, and employee awareness are also essential for protecting sensitive information.

Tsuiman notes that companies with industry-recognized security certifications (like SOC2, ISO 27001, etc.) and clearly defined information security principles are generally more trustworthy.

Adapting to New Regulations and International Markets

If a country, such as Australia, decides to enforce stricter age verification on well-known platforms, how easily can Veriff’s solutions be integrated? Tsuiman believes Veriff’s technology would be beneficial for platforms in Australia and in several U.S. states with similar initiatives.

Veriff has discussed potential collaboration with several well-known platforms, but, in most cases, platforms only approach identity verification providers when required by legislation.

One positive example of proactive implementation is Veriff’s collaboration with Starship Technologies. Customers using Starship’s delivery robots must undergo age verification not only when placing an order for age-restricted products but also when retrieving the order from the robot.

How can we prevent the misuse of age estimation systems?

Preventing misuse requires verifying the source of the information. Veriff uses a combination of over 1,000 different data points for identity verification, including biometric, behavioral, and device data, as well as network connection details.

Combining multiple verification methods is always more effective than relying on a single source of information.

Legal and ethical considerations of age verification

Under European Union law, the right to personal data protection is a fundamental right. While GDPR is a key part of this framework, it doesn’t prevent states from requiring data collection for specific legal purposes. For instance, health services are legally required to collect certain personal data to provide care, and financial transactions are monitored for audit and regulatory compliance.

When it comes to age verification, companies must assess whether the data collection is necessary and proportionate to achieve a specific purpose. The GDPR principles require data minimization, accuracy, and storage limitations.

If a country mandates age verification, the law should specify the data collection requirements and the type of data that can and cannot be collected. Without clear guidelines, companies must decide on the most effective way to achieve age verification while respecting users’ privacy rights.

Avoiding discrimination and overburdening users

Technology must be properly designed and implemented to avoid discrimination against specific user groups. This is especially relevant for platforms with users from diverse regions, whether it’s Australia, Estonia, or India.

To reduce the burden on users, companies can design simple, user-friendly experiences. For example, facial recognition-based systems are convenient but may face legal challenges if banned for age verification.

Tsuiman emphasizes that privacy-friendly technologies and solutions exist. Lawmakers should involve industry experts in discussions about regulatory requirements, as this ensures balanced and technically feasible solutions.

How to verify age in countries without standardized IDs?

Many countries have ID systems, but the quality varies. Facial recognition-based solutions offer a practical approach, especially in countries without standardized documents. Where possible, additional cross-checks can be conducted using databases or registries, though this approach raises data protection challenges.

The future of online age verification

AI is already proving its potential to assess age, and future developments will only improve accuracy. Countries like Australia, and some U.S. states, are exploring regulatory frameworks to protect children online. Veriff’s solutions, like Age Estimation, offer a privacy-conscious approach to age verification without needing official ID documents.

With solutions like Veriff’s in development, the ability to accurately verify age using only a selfie may soon become a standard feature of online platforms. It’s a step forward in online safety, privacy, and fraud prevention.

The post Deceptive looks: can machines pinpoint person’s age? appeared first on Veriff.

Thankfully, KYC issues can be simple to overcome when the right processes and structures are put in place. To help you learn more about how to overcome common KYC issues and challenges, we’ve put together this handy guide.

Common challenges for KYC compliance

Putting proper KYC processes in place is essential if you’re looking to ensure compliance with anti-money laundering directives.

However, when they’re creating AML and KYC processes, many companies are wasting huge sums of money and countless man hours because their processes are ineffective.

Common challenges faced by firms include:

• High onboarding costs
• Low conversion rates
• Lengthy onboarding processes
• Poor record keeping
• An inability to spot a change in circumstances
• Wasting time and money on false positives

How can you prevent these?

The easiest way to prevent any of these challenges arising is by using a class-leading AML and KYC compliance solution. By enlisting the help of a piece of software such as this, you can automate much of the process and save on man hours. Plus, you can also verify the identity of your customers in as little as six seconds.

By using a dedicated piece of software, not only can you overcome KYC issues, but you can also show regulators that you take financial crime and compliance seriously. On top of this, you can also ensure that you’re only ever asking your customers for the information you actually need, so the process won’t appear burdensome.

KYC compliance checklist

Due to the importance of AML policies, a number of AML fundamentals exist that businesses must follow regardless of the jurisdictions they operate in.

These fundamentals work as forms of best practice and should form the basis of a KYC compliance checklist that you follow on a daily basis. These fundamentals include:

Customer identification program (CIP)

As part of your CIP, you must identify your customers and their financial background. This process will also help you monitor their financial activities once they’ve opened an account.  

When onboarding your customers, you must ask them for several key pieces of personal information, including their full name, date of birth, and permanent address. The customer must also provide you with a copy of an identity document, so you can verify this information.

Customer due diligence process (CDD)

Once you’ve identified your customer, you must then calculate what level of risk this customer poses to your business. Depending on the customer, you can employ one of three levels of CDD. These are:

• Simplified Due Diligence (SDD)
• Customer Due Diligence (CDD)
• Enhanced Due Diligence (EDD)

While customers who pose a low level of risk will be subjected to SDD as part of the onboarding process, those who pose a high level of risk (such as a politically exposed person) will be subjected to EDD processes.

Ongoing monitoring

Effective KYC processes don’t stop once a customer has successfully opened an account. Instead, you must monitor your customers on an ongoing basis. This will help you spot whether their risk level has changed or whether their activities are suspicious.

By continually screening your customers, you can keep an eye on their transactions and receive alerts if anything suspicious happens.

Tips for overcoming KYC issues

Although KYC issues can cause headaches for businesses, it is possible to overcome them with the correct planning and organization. Our top tips for overcoming KYC issues include:

Put written policies in place

AML regulations and KYC processes can be complex. Many of them also need to be followed to the letter. As a result, to make sure all staff members understand your processes and follow them correctly, you must put written policies in place. This way, all of your policies can be viewed by both staff members and regulators. Within your written policies, you should include information regarding:

• What your identification processes include
• What reports you create
• What regulations you’re currently complying with and how you ensure compliance
• How you communicate with regulators
• Your record retention policy
• How regularly your policies are reviewed
• Whether your policies have been independently audited

Employing a compliance officer

On top of this, you should also employ an experienced AML compliance officer who can guide your AML and KYC efforts.

A compliance officer should help you put your AML program in place, resolve KYC issues, and regularly review compliance.

Overall, the role of an AML compliance officer is to take ownership over the system and ensure that processes are followed and updated. They must also ensure that reports are filed, training is correct, and that the system is running smoothly.

Use a risk-based approach

As we mentioned earlier, the way you approach KYC and due diligence should reflect the level of risk that your firm faces. Due to this, you should employ a risk-based approach to customer due diligence (CDD) rather than making each customer face the same checks. This way, you can ensure that your approach to KYC and compliance is appropriate and proportional.

By employing a risk-based approach to CDD, you will receive a number of benefits. For example, you can make sure that you’re meeting your compliance obligations.

However, a risk-based approach to CDD will also help you overcome a number of KYC issues. For example, you can lower costs by only paying for the checks you need. You’ll also improve your conversion rates because customers won’t be subjected to onerous checks. 

Speak with the KYC compliance experts at Veriff

Here at Veriff, our AML and KYC compliance solution can help you show regulators that you take financial crime and compliance seriously. It can also help you comply with regulations and fight financial crime.

If you’re interested in learning more about how you can meet your obligations while making the process as frictionless as possible for your customers, then talk to the KYC compliance experts at Veriff today. 

The post KYC issues and challenges appeared first on Veriff.

In traditional banking, a financial institution is required  to prevent financial crimes and illegal activities, such as terrorism financing, by implementing practices to meet know your customer (KYC) requirements.KYC compliance involves verifying customers before granting access to everyday services like opening bank accounts, getting debit or credit cards.  In financial services, the need remains to verify the identity of would-be customers, but with the growth of the digital bank worldwide, institutions are looking for more innovative solutions to complete enhanced due diligence (EDD), customer due diligence (CDD), and other compliance measures.

Of course, alongside these developments, we are also seeing the rapid advancement of Artificial intelligence (AI) in the form of machine learning – the application of which promises to be transformative for many sectors. However, as well as being transformative in a positive sense – delivering automation, efficiency, increased productivity and cost reduction – it also brings enhanced risk. For financial services firms, that includes heightened security and fraud risks – and AI is making it easier for individuals to carry out identity fraud.

Neobanking is no exception. By analyzing huge volumes of digital data, automated decision engines can recognize patterns and progressively improve the speed and accuracy of processes. This kind of machine learning is already being used with great success by neobanks, both to improve fraud prevention and to deliver a better user experience. But they, too, also face the negative risks posed.

What exactly are neobanks and how do they differ?

Neobanks, sometimes referred to as “challenger banks,” are fintech firms that offer apps, software and other technologies to streamline online customer experience (mobile / online banking) . These fintechs generally specialize in particular financial products, like checking and savings accounts. They also tend to be more agile and transparent than their megabank counterparts, even though many of them partner with such institutions to ensure their financial products.

In the U.S., these fintechs are more commonly referred to as neobanks. The term “challenger bank” was first popularized in the U.K. to refer to a number of fintech banking startups that emerged in the wake of the 2007-2009 financial crisis.

Do neobanks face greater risks?

Neobanks do come with certain risks that potential customers should be aware of:

1. Regulatory and legal risks

• Regulatory environment: neobanks often operate under different regulatory frameworks compared to traditional banks. Some may not have the same level of regulatory oversight, which can affect their stability and customer protections.
• Licensing: some neobanks operate under partnerships with traditional banks, while others may have their own banking licenses. The level of protection can vary depending on the licensing arrangements.

2. Financial stability

• Profitability: many neobanks are not yet profitable and rely on venture capital funding. This can pose risks if they are unable to sustain operations or secure additional funding.
• Resilience to economic downturns: as newer institutions, neobanks might not have the same financial resilience as established banks, potentially making them more vulnerable during economic downturns.

3. Technology and security risks

• Cybersecurity: as digital-only platforms, neobanks are highly dependent on technology. They must maintain robust cybersecurity measures to protect against hacking, fraud, and data breaches.
• Technical issues: outages or technical issues can disrupt access to funds and services, causing inconvenience and potential financial losses for customers.

4. Customer support and service

• Limited physical presence: the absence of physical branches can be a drawback for customers who prefer face-to-face interactions for complex issues or concerns.
• Customer service quality: the quality and availability of customer support can vary, with some customers experiencing difficulties in resolving issues promptly.

5. Deposit insurance and fund protection

• Deposit insurance: it’s essential to verify whether deposits are insured and to what extent. In the U.S., for example, traditional banks are typically insured by the FDIC, but this may not be the case for all neobanks.
• Funds protection: understanding how your funds are protected in the event of the neobank’s failure is crucial. Some neobanks partner with traditional banks for deposit insurance, while others may have different arrangements.

6. Trust and reputation

• Reputation: as newer entities, neobanks may not have established a long track record of trust and reliability. Researching customer reviews and the bank’s history can provide insights into their reputation.

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Speak with the experts at Veriff

If you run a financial institution, then having proper anti-money laundering customer due diligence processes in place is vital. Thankfully, our IDV & AML Screening solution can help you fight financial crime and show regulators that you take financial crime and compliance seriously.

Veriff’s Proof of Address product has been bolstered with additional data extraction capabilities to work seamlessly alongside our product ecosystem. The updates to POA will further reduce user friction, lower costs, and continue to comply with regulators. Ensure your customers aren’t waiting hours, or even days, for approval.

If you’d like to hear more about how our solution can help you, then talk to our compliance experts today.

Improving accuracy

IDV is a critical component in the KYC process, mandated by regulators to combat money laundering. The best IDV systems compare live biometric data from a selfie with stored biometric data to authenticate customer sessions. By incorporating machine learning algorithms programmed to identify patterns into this kind of automated IDV solution, the data collected can be used to adjust and improve the accuracy of its decision-making over time. 

Because machine learning makes predictions based on previous experience, including previous fraud schemes, novelty is a potential blind spot for the technology. The larger and more current the dataset, therefore, the lower the risk that an automated decision engine will make a mistake. For identity verification, for example, access to a dataset that includes plentiful biometric data for a range of ethnicities and ages is important in minimizing potential bias. In addition, cross-comparing verification sessions based on device, network and customer behavior can provide a greater richness and variety to the data a decision engine uses to learn and improve its decision making.

By analyzing huge volumes of digital data, automated decision engines can recognize patterns and progressively improve the speed and accuracy of processes. This kind of machine learning is already being used with great success by neobanks – and by Veriff.

IDV is a critical component in the KYC process, mandated by regulators to combat money laundering. The best IDV systems compare live biometric data from a selfie with stored biometric data to authenticate customer sessions. By incorporating machine learning algorithms programmed to identify patterns into this kind of automated IDV solution, the data collected can be used to adjust and improve the accuracy of its decision-making over time.

Maksim Afanasjev Staff Product Manager

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The post Neobanks: How AI can turbocharge your KYC process appeared first on Veriff.

Customer due diligence involves taking steps to identify a customer and verify that they are who they claim to be. Typically, this means a business must gather essential information, such as the customer’s name, residential address, and date of birth. The business then requests an official government document, like a driver´s licence, to confirm and validate the identity. Additionally, customer due diligence is about understanding the level of risk a potential customer poses and determining whether this risk aligns with the organization’s risk appetite.

Your anti-money laundering responsibilities

Customer due diligence is a foundation of know your customer (KYC) processes and AML strategies. CDD requires companies to understand who their customers are, their financial behaviors, and what kind of money laundering or terrorism financing risk they present. All Financial Action Task Force (FATF) member states must implement CDD methods.

Financial institutions have several responsibilities regarding AML, including devising a comprehensive anti-money laundering policy, which we’ll cover in detail later. 

However, there is also a number of important reasons why financial institutions should carry out customer due diligence regardless. In fact, carrying out appropriate customer due diligence ensures:

• The organization remains compliant with the regulations and laws of the regions or markets they are operating in
• The customer attempting to access the service is exactly who they’re claiming to be
• Customers are not trying to commit fraud, launder money, or finance terrorism

What are the key CDD requirements in AML?

The four key customer due diligence requirements typically include:

• Identity Verification: Financial institutions must verify the identity of their customers  by collecting reliable, independent source documents, data, or information.
• Risk Assessment: Banks and financial entities are required to assess the risk level associated with each customer, which may be influenced by the customer’s background, type of business activity, the nature of the business relationship, and the country of operation.
• Ongoing Monitoring: This involves regular scrutiny of transactions and accounts to detect any unusual or suspicious activities that deviate from the customer’s profile or business patterns.
• Beneficial Ownership: For legal entity clients, institutions must take steps to understand the ownership and control structure of the customer, identifying the ultimate beneficial owners.

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Enhanced due diligence measures and when to use them

Enhanced due diligence (EDD) is a KYC process that highlights risks that cannot be detected by the usual AML customer due diligence processes.

EDD goes beyond CDD. It looks to establish a higher level of identity assurance and accurately evaluates the risk category of the customer. EDD measures vary from CDD measures in the following ways:

• They’re more rigorous and robust, and they require significantly more evidence and detailed information from the customer
• The entire EDD process must be documented in detail, and regulators must be provided with immediate access to EDD reports
• EDD requirements call for “reasonable assurance” when calculating KYC risk. This means staff members must follow the necessary research steps and exercise professional skills when reaching a judgment
• Special attention must be given to politically exposed persons (PEPs)

EDD measures should be used when dealing with high-risk or high-net-worth customers and large transactions. This is because these transactions and customers pose greater risks to the financial sector – and are therefore heavily regulated and monitored.

By employing EDD measures for high-risk transactions and individuals, you can avoid fines and unwanted additional regulatory scrutiny. However, using these measures also provides you with other benefits. For example, by capturing more information from your customers, you can offer them bespoke solutions that better suit their needs. On top of this, by properly screening your customers, you can deter financial crime and enhance your own brand reputation by preventing dirty money from accessing your ecosystem.

The importance of risk-based CDD in an AML policy

Guidance from the Financial Action Task Force (FATF) states that companies should implement risk-based CDD measures as part of their AML due diligence policies. These measures should reflect the specific level of AML/CFT risk that individual customers present.

Risk-based customer due diligence is a way for companies to balance their compliance obligations with their budget and their resource requirements. Plus, by ensuring that checks aren’t too onerous, companies can ensure that the customer experience is preserved.

With a risk-based approach to CDD, a business can deploy the faster and more efficient CDD for low-risk customers, and the more enhanced due diligence for high-risk customers. An effective CDD process for customer onboarding will follow all the following steps:

• Prior to starting a relationship with the new customer, a company will establish the identity and business activities of the individual involved
• Once a customer has been identified and their identity has been verified, the company will categorize the level of risk this customer poses. This should then be documented, so it can be used for future regulatory checks
• Now that a customer’s risk category has been determined, the company will determine whether EDD measures are needed. If so, these should be carried out before a customer accesses a product or service

These checks are simple to run when you enlist the help of an AML and KYC compliance solution. Thankfully, with the help of our Identity Verification & AML screening tool, you will find it easy to verify exactly who your customers are and fight fraud.

Once onboarded, you can also monitor your customer on an ongoing basis and get notified if anything changes.

What are the key CDD requirements in AML?

The four key customer due diligence requirements typically include:

• Identity Verification: Financial institutions must verify the identity of their customers  by collecting reliable, independent source documents, data, or information.
• Risk Assessment: Banks and financial entities are required to assess the risk level associated with each customer, which may be influenced by the customer’s background, type of business activity, the nature of the business relationship, and the country of operation.
• Ongoing Monitoring: This involves regular scrutiny of transactions and accounts to detect any unusual or suspicious activities that deviate from the customer’s profile or business patterns.
• Beneficial Ownership: For legal entity clients, institutions must take steps to understand the ownership and control structure of the customer, identifying the ultimate beneficial owners.

Enhanced due diligence measures and when to use them

Enhanced due diligence (EDD) is a KYC process that highlights risks that cannot be detected by the usual AML customer due diligence processes.

EDD goes beyond CDD. It looks to establish a higher level of identity assurance and accurately evaluates the risk category of the customer. EDD measures vary from CDD measures in the following ways:

• They’re more rigorous and robust, and they require significantly more evidence and detailed information from the customer
• The entire EDD process must be documented in detail, and regulators must be provided with immediate access to EDD reports
• EDD requirements call for “reasonable assurance” when calculating KYC risk. This means staff members must follow the necessary research steps and exercise professional skills when reaching a judgment
• Special attention must be given to politically exposed persons (PEPs)

EDD measures should be used when dealing with high-risk or high-net-worth customers and large transactions. This is because these transactions and customers pose greater risks to the financial sector – and are therefore heavily regulated and monitored.

By employing EDD measures for high-risk transactions and individuals, you can avoid fines and unwanted additional regulatory scrutiny. However, using these measures also provides you with other benefits. For example, by capturing more information from your customers, you can offer them bespoke solutions that better suit their needs. On top of this, by properly screening your customers, you can deter financial crime and enhance your own brand reputation by preventing dirty money from accessing your ecosystem.

The importance of risk-based CDD in an AML policy

Guidance from the Financial Action Task Force (FATF) states that companies should implement risk-based CDD measures as part of their AML due diligence policies. These measures should reflect the specific level of AML/CFT risk that individual customers present.

Risk-based customer due diligence is a way for companies to balance their compliance obligations with their budget and their resource requirements. Plus, by ensuring that checks aren’t too onerous, companies can ensure that the customer experience is preserved.

With a risk-based approach to CDD, a business can deploy the faster and more efficient CDD for low-risk customers, and the more enhanced due diligence for high-risk customers. An effective CDD process for customer onboarding will follow all the following steps:

• Prior to starting a relationship with the new customer, a company will establish the identity and business activities of the individual involved
• Once a customer has been identified and their identity has been verified, the company will categorize the level of risk this customer poses. This should then be documented, so it can be used for future regulatory checks
• Now that a customer’s risk category has been determined, the company will determine whether EDD measures are needed. If so, these should be carried out before a customer accesses a product or service

These checks are simple to run when you enlist the help of an AML and KYC compliance solution. Thankfully, with the help of our Identity Verification & AML screening tool, you will find it easy to verify exactly who your customers are and fight fraud.

Once onboarded, you can also monitor your customer on an ongoing basis and get notified if anything changes.

Create and follow an AML policy

The exact AML due diligence policy you’ll need to create will depend on the type of business you run and the regulations and laws in the regions or markets where you operate. For example, in the EU, companies must comply with the Anti-Money Laundering Directive. However, firms in the US must make sure they comply with the Bank Secrecy Act.

Regardless, all AML compliance policies contain similar elements. To ensure compliance, your AML due diligence policy should contain:

• An effective system that helps you identify and report suspicious activity
• An ability to identify high-risk customers
• A system for monitoring customers on an ongoing basis
• A compliance officer who leads your efforts
• A series of internal practices that help you meet regulatory compliance
• Accurate risk assessments
• Provisions for an independent audit
• Adequate training for staff members

Let’s look at some of these factors in greater detail.

Ongoing monitoring

A customer’s risk profile will likely change during their time with your business – as they move jobs, change locations, and earn/spend more money. As a result, you need to monitor each customer on an ongoing basis. After all, if something changes, then you need to be aware before they begin to exploit your business.

A customer’s risk profile will likely change during their time with your business – as they move jobs, change locations, and earn/spend more money. As a result, you need to monitor each customer on an ongoing basis. After all, if something changes, then you need to be aware before they begin to exploit your business.

Maksim Afanasjev Staff Product Manager

Risk assessments

You should also regularly assess the AML risk that’s associated with your business. There’s no prescribed way of doing this, and you can decide for yourself how you carry out the risk assessment. However, you should document the risk assessment and update it regularly.

The complexity of your risk assessment will depend on the size and structure of your business, the range of activities your business carries out, and the nature of the products and services it supplies.

When assessing the risks that apply to your business, consider the following factors:

• The types of customers you have
• Where you and your customers are based
• The behavior of your customers
• How customers come to your business
• The products you sell or the services you offer
• Your delivery channels and payment processes, for example, cash over the counter, electronic transfers, or wire transfers
• Where the funds of your customers come from or go to

Once you’ve carried out your AML risk assessment, you need to put policies, controls, and procedures in place to reduce any money laundering risks that you’ve identified. You also need to monitor your business on an ongoing basis to make sure your controls are effective.

When appropriate, you should also get your AML processes, procedures, and risk assessments independently audited to ensure that there aren’t any weaknesses.  

Record keeping

Keep a record of all anti-money laundering customer due diligence measures that you carry out, including:

• Customer identification documents that you’ve obtained
• Risk assessments you’ve carried out
• Your policies, controls, and procedures
• Staff training records

By keeping records, you’ll be able to demonstrate law enforcement officials and regulators that you have complied with regulations. If you’re audited or there’s an investigation into one of your customers, you’ll be expected to hand over all this information promptly.

As part of this process, it’s vital that you develop and implement internal guidelines regarding information sharing within your organization. You should assign clear roles and report any suspicious activities immediately.

Transaction reporting

Depending on the exact nature of your business, you may need to monitor customer transactions on an ongoing basis. This way, you can see whether a customer’s activity is consistent with their risk profile. If it isn’t, you’ll need to report the change in activity immediately.

In the US, for example, if a customer attempts a currency transaction of more than $10,000, then a bank must file a currency transaction report (CTR). And, if a bank believes that a customer’s activity is suspicious, then it must file a suspicious activity report (SAR).

This means you must have the ability to handle and quickly expose activities related to money laundering, such as finding fake data or abnormally big sums of money deposited into a particular account. A system or a piece of software can help you with this. Some of these systems can also file reports automatically.

Appoint an AML compliance officer

To oversee your AML policies and ensure that you’re compliant with latest regulations, appoint an AML compliance officer. This individual will be responsible for overseeing the development and implementation of your AML program –  to ensure that the institution is not exposed to criminal risk and does not inadvertently facilitate financial crime.

The AML compliance officer is also responsible for ensuring that employees are aware of their company’s AML policy and that they have received training about this. Training is particularly important in departments where staff come into direct contact with clients, as improved knowledge gives them the insight required to spot suspicious activities.

Speak with the experts at Veriff

If you run a financial institution, then having proper anti-money laundering customer due diligence processes in place is vital. Thankfully, our IDV & AML Screening solution can help you fight financial crime and show regulators that you take financial crime and compliance seriously.

Veriff’s Proof of Address product has been bolstered with additional data extraction capabilities to work seamlessly alongside our product ecosystem. The updates to POA will further reduce user friction, lower costs, and continue to comply with regulators. Ensure your customers aren’t waiting hours, or even days, for approval.

If you’d like to hear more about how our solution can help you, then talk to our compliance experts today.

The post Anti-money laundering customer due diligence appeared first on Veriff.

In this guide, we’ll cover what these crypto KYC processes involve, why they need to be implemented, and the benefits they provide. 

What’s the role of KYC in crypto?

Cryptocurrency transactions between users are generally anonymous and take place in seconds. Due to the speed of the transactions and the anonymity provided, criminals sometimes use cryptocurrencies in an attempt to evade conventional controls relating to money laundering.  

However, global regulators are beginning to pay closer attention to crypto transactions. Now, crypto exchanges and wallet providers are being asked to address the anonymity concerns associated with cryptocurrency transactions by implementing suitable know your customer (KYC) processes.

Crypto KYC is the first step in the anti-money laundering (AML) due diligence process. When a financial institution such as a crypto exchange onboards a new customer, they must use KYC processes in order to identify and verify the customer’s identity. In carrying out the process, they must also assess the customer’s risk profile and the nature of the business relationship.

Why do crypto exchanges require KYC?

KYC is now mandatory for most crypto exchanges and crypto wallet providers because they’re defined as MSBs (money service businesses) under federal regulations in the US.

It’s thought that enforcing crypto KYC compliance will help tackle malicious activity adjacent to the crypto space, such as ransomware attacks. At present, attackers are able to leverage the anonymity provided by decentralized cryptocurrencies to evade detection.

On top of this, regulators and industry leaders also hope that the introduction of crypto KYC processes will help improve the crypto sector’s public image. This is because stronger compliance procedures could help crypto shed its perceived association with money laundering and other criminal enterprises.

The challenge for KYC in crypto

By its very nature, the crypto industry is prone to problems regarding KYC. After all, the blockchain and decentralized services as a whole have been designed specifically to promote anonymity and to shun central authorities.

Due to this, many crypto firms have no idea who their customers are. Plus, many crypto buyers and traders have traditionally prized their privacy and have no desire to share their personal data with either crypto providers or the government. Instead, they feel that KYC checks are intrusive and unnecessary during the onboarding process.

However, in recent years, regulators have successfully convinced many of the world’s largest crypto firms that the current situation is unacceptable. Faced with the prospect of huge penalties and fines, even the most reluctant crypto firms have been compelled to introduce crypto KYC measures. This is partially because companies who have failed to implement effective crypto KYC safeguards have faced fines in excess of $100 million.

On top of this, the crypto market remains in flux. After all, although reputable crypto firms have now implemented KYC measures, it remains possible for investors to buy crypto without going through KYC processes. However, these exchanges are incredibly risky to use.

Similarly, around the world, crypto KYC measures vary. For example, in the US, FinCEN requires cryptocurrency exchanges to use KYC standards and also practice anti-money laundering measures to achieve regulatory compliance. However, in the EU, standards are not currently as high.

How does KYC and blockchain overlap?

Some experts in the crypto space believe that successfully incorporating KYC into blockchain platforms would be a positive change. This is because using blockchain technology for KYC would provide:

• Greater operational efficiency
• Real time and up-to-date customer data
• Immutability and transparency

On top of this, blockchain technology could also offer regulators a better understanding of how customers have been onboarded. If all actions by financial institutions are fully recorded and tracked, all activity data will be fully auditable. This information would also help regulators to better understand customer activity.

Plus, by using blockchain technology for crypto KYC, financial institutions will also be able to improve the customer experience by making processes more timely and efficient.

How to be KYC compliant in crypto

Now crypto businesses are regulated as financial institutions, they must integrate KYC processes into their anti-money laundering programs. In doing so, they must take appropriate steps to:

• Collect appropriate personally identifiable information (PII) from the customer
• Verify the identity of the customer
•  Acquire a better understanding of the customer’s activities
• Determine the probability that the customer poses a money laundering risk

To do this, most crypto exchanges and wallet providers will follow these steps:

1. Step one: Collect the customer’s PII, including their full name, date of birth, and address
2. Step two: Compare this information to a government-issued document, such as a passport or driving license. During this step of the process, the business must also verify the authenticity of the government-issued document
3. Step three: Ask the customer for a selfie. This is then used to verify that the person who is providing the information is the person who is pictured on the government-issued document
4. Step four: Verify the customer’s identity against official databases that contain information on politically exposed persons (PEP) and sanctioned individuals

In carrying out these steps, crypto businesses can determine the risk of money laundering and financial crime involving virtual currencies for each client. If required, they can then carry out additional due diligence checks. If the customer passes these checks, they can then be allowed to access the service.

However, the crypto KYC process doesn’t end when a customer has been successfully onboarded. This is because the customer must also be monitored on an ongoing basis. This is to ensure that any suspicious transactions can be spotted and, if necessary, reported to authorities.

Benefits of KYC for crypto

Although there’s some opposition to KYC in the crypto space, the process actually provides businesses with a number of benefits, including:

Improved customer transparency and trust

Crypto KYC can increase transparency and trust among customers. This is because, when all user identities are verified, customers will feel confident that their crypto exchange is taking proactive and preventive measures to protect their account and their crypto. As a result, they’re more likely to continue using the service because they trust it.

Reduced risk for money laundering

When all identities are verified and crypto exchanges know their customers, the risk of money laundering is vastly reduced. This is because vigorous identity verification processes ensure that each customer is legitimate. This then significantly reduces fraudulent activity and improves market reputation.

Reduced legal risks

Legal obligations in the crypto space are continually changing and evolving. Now, crypto businesses face greater regulatory challenges than ever before.

But, by implementing robust crypto KYC processes now, businesses can stay ahead of the curve. Instead of chasing after new regulations, they can focus on increasing conversion rates, streamlining transactions, and ensuring compliance as international guidelines evolve.

On top of this, by continually staying on top of regulatory changes, businesses can ensure they’re always compliant. In doing so, they can avoid the strict penalties that can be handed down by regulators.

Improved crypto market stability

The cryptocurrency market is notoriously volatile. However, much of this volatility is driven by instability and the suspicious nature of some anonymous transactions. By removing anonymity from the process, crypto KYC can bring stability to the market.

How Veriff solves KYC for crypto

Here at Veriff, we make investing in crypto safe and easy. This is because our selfie-based crypto identity verification platform provides industry-leading conversion rates and high levels of fraud prevention.

Our purpose-built solution provides global compliance. With our help, you can satisfy FINRA, SEC, and GDPR requirements, as well as enforce AMLD6 guidelines. Plus, you can verify your customers in as little as six seconds and verify 95% of your customers on the first try.

Speak with the KYC compliance experts at Veriff

Our crypto KYC compliance experts are available to help you. If you’d like to learn more about how our crypto identity verification solution can help you meet your crypto KYC obligations, get in touch with the team today. We’d love to provide you with a personalized demo that shows exactly how we can help you meet your goals. 

The post Crypto KYC and blockchain appeared first on Veriff.

In this article, we’ll cover the ins-and-outs of Know Your Customer (KYC) compliance and how to comply with KYC requirements in your organization. As a bonus, you’ll become an expert at identifying some of the endless KYC-related acronyms, like CDD, CTF, CIP, PEP, and PII.

What is KYC?

KYC means conducting background checks on customers for pre-onboarding risk assessments. It is done by businesses to identify and verify the identities of clients to meet regulatory compliance. In other words, it ensures that you know your customers. Meeting KYC or Customer Due Diligence (CDD) standards is a cornerstone of modern Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF) policies.

Corporate KYC is an expansion of standard KYC regulations. Instead of focusing on verifying individuals, corporate KYC covers a set of procedures to verify businesses. It plays a crucial role in identifying fake companies and as such, corporate KYC regulations are a modern shield against worldwide money laundering. Corporate KYC plays a significant role in fulfilling KYC and AML compliance and it’s also often referred to as KYB (Know Your Business).

On Facebook, you see our “alternative” KYC definition from Veriff’s “identify verification industry glossary”:

Who is impacted by KYC requirements?

Initially, the regulations on KYC procedures only targeted financial institutions. Nowadays, however, KYC is considered a key obligatory procedure not only for financial but also for various non-financial institutions. The complete list of regulated entities that are impacted by KYC requirements varies from one country to another. Typically, the list of regulated entities includes:

• Financial institutions
• Banks
• Fintech companies
• Credit unions
• Gambling entities and casinos
• Wallet providers and cryptocurrency exchanges

Well-structured KYC processes greatly reduce the risk of fraud. Proper knowledge of KYC requirements and the associated procedures are becoming an increasingly important tool of survival in the complex world of anti-money laundering. But what exactly is the role of KYC in anti-money laundering? Let’s find out.

The role of KYC in AML

The term AML refers to different regulations from governments and international organizations. The main purpose of the existing AML regulations, such as the latest Anti-Money Laundering Directive (AMLD5) regulatory framework, is to address the following two types of crimes:

• Money laundering
• Financing terrorism

KYC is an essential component in the combating of these kinds of crimes, making KYC compliance an integral process for AML purposes. After all, organizations need to pay attention to who they onboard as a customer, and proper customer risk assessment through a well-functioning KYC process can filter out customers that are linked with money laundering or terrorism.

In short, KYC and AML are two very closely related sets of regulations. And, it’s nearly impossible to have one without the other. This means that if you want your organization to be fully compliant with either KYC or AML, you’ll inevitably have to learn the ins-and-outs of both of them.

The value of KYC was also highlighted during the COVID-19 pandemic. In a survey from the Global Coalition to Fight Financial Crime, 95.5% of respondents believed that due to the pandemic, financial crimes would increase. Any financial crime is closely tied together with AML, and KYC can play a significant role in the prevention of such crime by conducting precautionary measures. Considering all the worrying worldwide statistics of fraud, illicit activity, economic crimes, and money laundering, it’s no wonder why KYC regulations are becoming increasingly important. 

So, what about the actual KYC process itself? What does it look like?

The primary components of the KYC Process

1. Customer identification program (CIP)

The KYC process includes obtaining and checking Personally Identifiable Information (PII). This phase is referred to as a Customer Identification Program (CIP). CIP is necessary to curb money laundering, counteract terrorist financing, and to combat various other criminal activities that could arise from improper identification of customers.

However, as is often the case with KYC regulations, there’s no one-size-fits-all type of solution to CIP. While CIP provides general instructions, it’s up to each company to decide which PII they choose to request according to their policy.

Some of the more commonly requested examples of PII include:

• Full name of the client
• Date of birth of the client
• Address of the client

To verify PII, the clients might need to introduce official documents such as a passport, ID card, driver’s license, or residence permit. However, besides these three examples, various other types of PII can be requested from clients, and the PII verification processes should be adjusted accordingly.

For verification purposes, verifiers may also run PEP (Politically Exposed Person) and Sanctions checks against worldwide watch-lists. Veriff offers both PEP and Sanctions checks as one of its optional services.

2. Customer due diligence (CDD)

In the European Union, KYC process requirements are determined by the AMLD5 framework. According to the AMLD5, obligated entities must ensure that they know who their customers are. In legal policies, this process is referred to as “Customer Due Diligence (CDD)”, and it’s an integral part of financial institutions and other designated non-financial businesses and professions. Read more in our in-depth article on 6 key AMLD5 guidelines to examine the topic in-depth. And, here’s a visual explanation of AML guidelines from the European Commission.

In the United States, on the other hand, CDD requirements are enforced by the Financial Crimes Enforcement Network (FinCEN). FinCEN is authorized by the Bank Secrecy Act (BSA) to impose AML requirements on obligated legal entities and they require all obligated entities to be compliant with four main CDD rules. These rules bolster CDD requirements for financial institutions in the United States, and they apply to entities such as U.S. banks, mutual funds, securities brokers, and futures commission merchants, among others.

Examining both the four CDD rules from the FinCEN and the CDD recommendations from the Financial Action Task Force (FATF) reveals that the two sets of rules are nearly identical. According to them, obligated entities must:

1. Identify and verify customers
2. Identify and verify beneficial ownerships
3. Understand customer relationships and their risk profiles
4. Continue ongoing monitoring of customers and their transactions

An organization that abides by these sets of rules and recommendations is one step closer to becoming KYC compliant. However, the process of performing CDD is a continuous one, and it varies case-by-case depending on the results of the initial customer risk assessment. That is why there are three different levels of CDD, each meant to be used for different clients depending on their risk levels.

These are the three primary types of CDD procedures

• Simplified Due Diligence (SDD) is used in cases where there is a low risk of money laundering or terrorism financing and a full CDD isn’t demanded.
• Basic Customer Due Diligence (CDD) covers the basic information that is collected for customer identification and verification.
• Enhanced Due Diligence (EDD) includes additional information that is obtained for higher-risk customers. This information is used to better understand customer activity and to mitigate any potential risks of criminal activities.

How much does KYC compliance cost to implement?

According to recent findings, KYC processes cost the average bank $60 million annually. This is because each individual check costs between $10 and $100. 

However, some companies can spend far more than this on KYC compliance. For example, in 2013 alone, JPMorgan added 5,000 employees to their compliance team and spent $1 billion on controls.

But, there’s no reason why KYC compliance needs to cost your business this much money. Here at Veriff, our starter plans cost as little as $1.49 per verification. Plus, you can enjoy a 30-day free trial. Book a consultation today to see exactly how we can help you. Alternatively, start by learning more about us.

KYC risk profile?

If you’re running a regulated entity, then it’s important that you know what a KYC risk profile (also known as a KYC risk scale) is.

Essentially, a KYC risk profile is a calculation of risk. The risk profile is created when a customer relationship is established. It is then used as a baseline for detecting suspicious activities.

Generally speaking, if a client’s risk level is high, they will be consistently and closely monitored. Crucially though, even if the risk rating of a client is low, they will still be monitored, just not as diligently.

Although a KYC risk profile is useful during onboarding, it can also be used to make a prediction of what a client’s risk should look like in the future. This is useful for determining whether something is unusual, out of place, or suspicious. For example, if a client’s transactions suddenly begin to diverge from your predictions, this may indicate suspicious behavior that needs to be investigated further.

How Veriff can simplify the KYC process

Now that you’ve had a chance to glimpse into the abbreviation-rich and oftentimes complicated world of KYC and AML, you might already be pulling your hair out from all these regulations and requirements. While it’s true that becoming legally compliant with all KYC and AML requirements is no easy task, it is a task that can be simplified through the use of online identification services.

In the 21st century, most regulators and organizations already acknowledge the reliability and ease of use of Electronic Know Your Customer (eKYC) and online identification services. This means that all the complicated and time-intensive processes involving personal data, customer identification, and verification can be reduced to a matter of minutes, if not seconds.

Through machine learning, artificial intelligence, and identity experts, Veriff provides organizations with the tools necessary to provide best-in-class online identity verification in seconds. Veriff collects more data points than any other identity verification provider. Many large-scale companies have chosen Veriff as their KYC and fraud prevention service provider. We hope you’ll also consider doing the same if you’re looking for someone reliable to help you achieve KYC compliance without losing your sanity in the process.

Book a free consultation

Interested in learning more about how our AML and KYC compliance solution can help your business? Then book a free consultation with us today.

Simply give us a few basic details about you and your company, and we’ll provide you with a personalized demo of what Veriff can do for you.

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The post Achieving KYC compliance: here’s why, and here’s how appeared first on Veriff.

These terms are commonly used in the same context, but they mean different things. The significant difference between these two terms is that KYC is a specific process which takes place, upon fulfilling certain conditions (e.g. establishing business relationships, conducting an occasional transaction that exceeds certain amount, etc.), whereas AML is a entire set of procedures and processes aimed to combat money laundering and financing of terrorism, which can include KYC. This is the process of obtaining the information about the customer from a reliable and independent source, verifying it, and determining the risks from the establishment of a business relationship with said customer. The KYC process is used to ensure that entities obligated under the AML framework have sufficient knowledge about their customers and certainty about their identity. AML, on the contrary, can be described as an umbrella term for the entire set of regulated mechanisms and procedures that has to be implemented by a variety of financial actors to combat money laundering and financing of terrorism

In this article, we’ll tell you more about both AML and KYC programs, talk in-depth about the key differences, and explain the relevant processes, requirements, guidelines, and tools. 

What is AML & what does it do?

AML refers to the activities that financial and credit institutions, and companies in other fields, such as gambling providers or lawyers providing specific services, perform to actively monitor clients and prevent financial crimes. The anti-money laundering process helps prevent a wide range of illicit activities such as money laundering or financing of terrorism. Companies, in any case, need to take these measures in order to avoid the potential aftermath of regulatory action taken against them.

The goal is to implement specific regulatory provisions to prevent illicit financial activities by addressing the risk factors inherent to the service, product, or the customer of the company. The AML framework consists of numerous elements – among these are risk assessment of clients, risk management systems, KYC (or customer due diligence) programs, and relevant reporting obligations. It is particularly important for the companies exposed to higher risks of financial crimes to implement an effective anti-money laundering compliance program to avoid facilitating monetary crimes and ensure regulatory compliance. The system should be comprehensive, detailed, regulation-specific, and well-planned. 

What is KYC & what does it do?

We can define KYC as the process of obtaining and verifying a customer’s identity against independent and reliable sources to protect an entity against various risks of financial crime. One of the steps of this process requires potential customers to provide credentials, such as identity documents, to prove that they are who they claim to be. For example, financial institutions may require individuals to verify themselves before opening an account to ascertain their identity. This allows companies to make sure that their services are used only for lawful purposes and to be able to assist relevant authorities throughout an investigation when any issues occur.

Besides preventing crime, KYC processes help banks and other financial service providers understand their customers, improve services, and effectively manage risks. Hence, it is vital for financial institutions to correctly implement such procedures to minimize the chances of aiding any unlawful financial activities. The financial institutions are encouraged to consult different stakeholders, both internal and external, to understand their specific regulatory obligations with regards to the KYC procedures. 

How does AML work vs KYC?

The main objective of the AML framework is to prevent criminals from easily accessing financial systems with the intention of laundering funds or conducting other financial crimes. The overall process aims to implement specific regulatory provisions to prevent illegal activities, mostly related to the financial system, and to avoid the usage of such a system for laundering funds. KYC, on the other hand, is one of the core elements of an AML framework as explained earlier. By obtaining the information about the customer as well as verifying their identity, it aims to prevent criminals from using a specific financial service for their unlawful activities. 

There are various components that help companies adjust their AML and KYC processes to suit their needs. An excessive library of regulations, opinions of supervisory authorities, and guidelines, have been issued by the financial supervisors to help companies to prevent financial crime. Let’s take a look at these components and talk about the major differences between AML and KYC systems in depth. 

AML & KYC processes

In order to understand these processes, it is important to know about the risks associated with Money Laundering. This criminal activity can produce a massive negative impact on society, companies, and individuals. That’s why businesses worldwide must strive for compliance with money laundering prevention practices. 

AML practices put procedures and systems in place that prevent criminals from being able to easily access financial products and services. Upon correct implementation of such systems, it is almost impossible to hide the illicit origins of money within transactions. One of the most important components of the AML system is the KYC process. Companies are obligated to establish their customer’s identities and verify them before providing services or products. 

AML & KYC requirements

During client onboarding, AML-obligated companies need to identify and verify the information on their customers to complete the procedure. According to the regulations, companies must take extra steps when the relationship with a customer has numerous higher-risk factors, in order to prevent circumvention of money laundering systems. They should actively monitor their customers’ behaviour with regards to the usage of their services. However, in certain cases, publicly available information may also give grounds for suspicions, and institutions must report suspicious activities when they occur, in accordance with the relevant regulatory requirements. 

The KYC procedure is a mandatory step during this operation. It is essential to identify a client and verify their identity when providing services to them. This obligation helps companies fight fraud and avoid penalties from regulators. Businesses must ensure that they have a proper identity verification system set up, capable of verifying individuals using their ID documents and maintaining a track of high-risk customers to take actions when the need arises. 

AML & KYC regulations 

Different countries have different AML and KYC regulations for banks, and other credit and financial institutions to be considered compliant. Generally though, these steps are quite similar to each other because they’re based on the same practices. Companies at risk of financial crime are required to implement an anti-money laundering program in order to avoid facilitating monetary crime and ensure compliance with the relevant regulations. The primary goal of these regulations is to detect, and respond to, the risks of money laundering and terrorism financing, thus preventing both.

On the other hand, we can describe KYC compliance as a regulatory obligation to develop customer identification processes, verify the information obtained about the customers on the basis of trust-worthy sources, as well as identifying and addressing the risks related to a particular product and customer. Consistent and effective application of the KYC procedures forms an integral part of the compliance with AML regulations.

AML & KYC tools

There are several tools that help companies be compliant with AML and KYC regulations worldwide. For example, here at Veriff, we offer a full-stack AML and KYC solution. The core components are Identity Verification, checking PEP & Sanctions databases, considering adverse information & media, and ongoing monitoring. 

Using these tools you can ensure that your customers are who they say they are, and fight identity fraud effectively. Our verification engine makes automated decisions in a matter of seconds, which can help companies run their operations smoothly. Veriff also allows developers to deploy the end-to-end compliance technology with a single integration.

How AML vs KYC works in Crypto

Cryptocurrency is a solution for many people worldwide to have cheaper and faster international transactions. Unfortunately, this is not the only reason why people are getting involved in the growing industry. The crypto sector has also enabled criminals to launder money and fund terrorists in an easier way by being a product that strongly favours anonymity. 

Regulatory bodies have been on a quest to address money laundering issues in the crypto industry that would help combat it, while not limiting the digital nature of the service. Previously, only crypto asset exchanges and custodian wallet providers have been subject to relevant anti money laundering regulations, yet in anticipation of upcoming EU-wide AML Regulations, more and more countries are subjecting all crypto-asset service providers to abide by  AML provisions.

Get help with AML & KYC services

Here at Veriff, we want to make it easy for companies to connect with honest people. Take a look at our full-stack AML & KYC Compliance solution that can help you fight financial crime effectively. It’s easy for developers to deploy Veriff’s end-to-end compliance technology with a single integration, backed by industry-leading support and account management. 

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