Five ways to ensure compliance with stricter anti-fraud rules

According to Nasdaq’s 2024 Global Financial Crime Report fraud is growing and evolving worldwide with $3.1 trillion of illicit funds flowing through the global financial system.

As a result, fraud prevention regulations are being tightened up globally. For example, in the UK a new ‘Failure to Prevent Fraud’ criminal offence will be enforced from September, as part of the Economic Crime and Corporate Transparency Act 2023. This will see businesses being held liable if they commit fraud or fail to implement reasonable measures to prevent fraud committed by their employees, agents or subsidiaries.

To keep up with evolving global anti-fraud legislation those in financial services need to ensure that they deliver best practice compliance with these regulations, not only to reduce the opportunity for fraud, but the large fines, possible criminal charges against directors and the reputational damage that can be inflicted.

Five ways for financial institutions to ensure best practice compliance with stricter global anti-fraud regulations, include:

1. 1. 1. Improve customer contact data quality from the outset: The quality of contact data is critical to the effectiveness of ID processes, influencing everything from end-to-end fraud prevention to delivering simple ID checks; meaning more advanced and costly techniques, like biometrics and liveness authentication, may not be required. Having accurate customer contact information, such as name, address, email and phone number, makes the verification process more reliable. Using this data ID verification technology can confidently cross-reference the information provided against official databases, or other authoritative sources, without inconsistencies that could lead to false positives or negatives. It’s important to recognize that address verification – having a consistently accurate, standardized address – is the cornerstone of contact data quality. With up-to-date customer addresses it’s much easier to match and verify identities across multiple sources. Therefore, verifying the accuracy and legitimacy of an individual’s address should be the first stage in any identity related process, with any discrepancies between a claimed address and official records highlighting a potential fraudster.
   2. Use an electronic identity verification (eIDV) platform: Doing so is the best way to undertake ID verification with fraud on the rise worldwide. Because these tools are “always on” they can, in real-time, cross-check the names and addresses (for proof of address), email addresses and phone numbers provided by prospective customers during remote onboarding. This provides a good customer experience while preventing fraud. For the best outcome sourcing an eIDV platform with access to billions of consumer and business records from reputable sources around the world, such as government, utility and credit agencies, is advised. The end result is the delivery of efficient customer onboarding as part of an effective ID verification service, anywhere in the world. Also, as the technology matures eIDV is increasingly offered at a range of affordable options.When compared with manual checks eIDV is considerably quicker, more accurate and cost effective for undertaking ID verification and preventing fraud. It’s because this technology requires no additional staffing or training costs, and there’s no risk of human error.
   3. Know Your Business (KYB) checks are vital: KYB screening is critical to fully understand the risks posed by new and existing business customers and suppliers, and therefore helps to prevent fraud from occurring. Particularly when fraud is often perpetrated by shell companies or organizational structures that aren’t real. Also, KYB checks help prevent financial crimes, such as money laundering and terror financing, which can cause considerable reputational damage.
   4. Integrated sanctions data: Despite the legal requirement for many in financial services who operate globally to screen against sanctions lists, it’s surprising how many don’t have access to such information or up-to-date versions of this data.Sanctions data needs to be collected from a wide range of trusted sources worldwide, ideally using a service that continually scans for updates on sanctions data and delivers them daily, in real-time. This automated approach is a much more efficient and accurate way to employ sanctions screening.
      It’s vital to obtain politically exposed person (PEP) and relatives and close associates (RCA) data from around the world, for a wider best practice approach to sanctions screening. Not only to protect your organization against potential fraud but avoid having customers that can damage your reputation. Because of the nature of their roles or relationships with individuals in positions of authority those in both groups are more likely to be involved with or drawn into crime. In the UK, for example, financial organizations are legally obliged to undertake enhanced checks of both domestic and foreign PEPs.
   5. Automated adverse media screening: Carrying out checks across online news sites, newspapers, magazines, TV, radio, social media and press releases, is very valuable in enabling those in financial services to keep up-to-date on the latest worldwide news and alerts in real-time on any arrests, court cases or convictions against users of their services. These may be PEPs and RCAs, along with others who could have possible negative regulatory, financial or reputational consequences to their organizations.

With new rules and regulations being enacted around the world to help prevent the growth in fraud it’s vital to ensure best practice compliance with them. This necessitates putting procedures in place to obtain customer contact data quality to support the wider ID process, as well as employ an eIDV tool, undertake KYB checks, use sanctions data, and embark on adverse media screening.

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