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Education

Digital payment The increased digitization of finance has created new
opportunities for criminals engaging in large-scale
trends: Keeping up money laundering and terrorist financing, according to
the Financial Crimes Enforcement Network (FinCEN). As
a result, governments and regulatory bodies have sought
while you scale up to strengthen anti-money laundering (AML) compliance.

The EU’s Sixth Anti-Money Laundering Directive includes
strict criteria and harsh penalties for AML non-compliance,
expanding the previous definition of criminal liability
to include any “legal persons”—including companies
and partnerships—involved in the process, regardless
of whether they directly benefit from it, and raising the
minimum jail sentence from one year to four. In the
United States, FinCEN has taken steps to combat fraud by
creating stricter rules for third-party actors.

Businesses have many reasons to tackle both of these issues;
they are equally key for establishing and maintaining
public trust in digital finance. Fortunately, businesses that
remain AML-compliant by establishing strong know your
customer (KYC) procedures can avoid penalties while
optimizing their services to maximize return.
By Dave McGibbon Know thy customer
Passbase
The boom in virtual asset service providers (VASPs) and
onsumers are showing a marked preference for decentralized finance (DeFi) promises to make online
digital payments. Once the exclusive domain payments more accessible and efficient, providing clear
of online shopping platforms, digital payments economic benefits. These also create a corresponding need
C have become increasingly essential to virtually for stronger KYC procedures to ensure that individuals
every industry. Digital payments can offer a convenient, using them truly are who they say they are.
easy to use, frictionless, low-cost and contactless experi-
ence, which has clear benefits for consumers. Current security practices lag behind available technologies.
Many online platforms still rely on passwords, email
These same features offer benefits to businesses as well. confirmation and two-factor authentication. Given that a
According to the IMF, fintech-forward businesses can large percentage of internet users reported using the same
scale across riskier clients and business segments—such password for multiple accounts (https://bit.ly/3ACuVd4),
as those in the crypto and NFT spaces—more rapidly increased instances of ATO shouldn't come as a surprise.
than their traditional counterparts, giving them a market Even some biometric technologies such as fingerprint
advantage. However, this enhanced scalability potentially detection and facial recognition have blind spots, as deep
comes at the cost of increased risk of fraud and other fake technology has proven able to bypass certain facial
finance-related crimes. recognition systems.

Businesses that address these security concerns early Fortunately, recent developments in identity verification
on while keeping an eye on the changing regulatory technology have made it possible to protect against
environment will be able to maximize the virtues of even the most sophisticated deep fake attacks. Digital
digital payments while insulating against their potential identity verification allows users to verify their identity
downsides. by uploading a government-issued ID and then ensure
liveness and face match by taking a video selfie that
The reality of fraud prompts them to move their face or make different facial
expressions while monitoring involuntary movements
Consumers have good reason to be wary of conducting like blinking and pupil dilation—all of which ensure that
the majority of their transactions online. Fraud conducted the individual to whom the account is registered is present
through online account takeover (ATO) has grown in when attempting to access it.
proportion to the explosion of digital payments. In 2021,
nearly 42 million internet users' accounts were hacked into The combination of biometric verification and liveness
and used to make fraudulent transactions, resulting in $52 detection provides the most comprehensive security
billion in losses (https://bit.ly/3cGrry8). system available, as it relies entirely on features unique to
each specific user.

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