Fight against fraud: tackling the major challenges of financial services

Janer Gorohhov from To verify shares some practical ideas on how to tackle financial services challenges such as digitization, shutting down bad actors and complex regulations

The financial services industry has evolved significantly throughout the COVID-19 pandemic as companies have changed their digital strategies to meet changing consumer demands. In fact, 88% of finance and insurance executives have increased the implementation of automation and AI tools within their organizations as part of the digitalization wave.

However, with financial services organizations rapidly expanding their digital services, the increased reliance on fintech and digital banking has given way to bad actors to increasingly target these companies and their customers. On top of that, financial services institutions face increasingly complex and stringent anti-money laundering (AML) and know-your-customer (KYC) regulations globally, as the need to navigating a series of regulations in order to achieve compliance standards is greater than ever before.

It has never been more important for financial services institutions to be one step ahead of these bad actors and complex regulations. Let’s dive deeper into these challenges and how they can be overcome.

Fintech and crypto fraud on the rise

Simply put, the increase in fraud rates speaks for itself: we’ve seen a 61% increase in fraud rates globally over the past year, with the US seeing more fluctuation while the EU has seen a more consistent growth in fraud. Fintechs were particularly hard hit (50% year-on-year increase) despite heavy investments in security and prevention tools, as malicious actors continued to advance their techniques and focus on a growing variety of digital fraud strategies such as synthetic identities and deepfakes.

We see a similar story in the crypto industry. As the crypto industry continues to grow, the risks are also increasing, which is worrying the industry as a whole. In 2021, we saw the first US exchange-traded fund follow the launch of Bitcoin, forever changing the crypto space in the country and expanding its already massive reach. As a result, crypto has become the most fraudulent industry compared to fintech and other industries.

These data points paint a chilling picture of the big hurdles that many organizations face when it comes to fraud. Organizations are under attack from all sides and every user must be vetted as financially motivated cybercriminals refuse to slow down.

Growing AML and KYC pressures

In addition to the growing threat of fraud, compliance departments are also navigating ever-changing AML and KYC regulations. AML fines reached $1.9 billion in 2021 alone, and the growing challenges of digital banking of the pandemic will only increase them, as factors such as outdated systems prevent organizations from keeping pace with rapidly changing compliance guidelines. We also see regulators on a mission to combat money laundering and terrorist financing within the historically anonymous crypto industry in particular, without limiting the digital benefits of the service.

Crypto-asset service providers and other financial services institutions should take the time to fully understand the scope of their respective compliance programs and leverage the right tools to help businesses continue to develop and evolve their programs to avoid significant fines and reputational damage.

Turn to Digital Identity Verification for help

With all of these challenges in play, organizations need to be able to trust that their customers are who they say they are, from both a fraud and compliance perspective. This is where identity verification solutions come in.

As fraudsters become more advanced when it comes to infiltrating online financial and crypto services, the need for robust identity verification capabilities is critical to keep users’ identities safe and protect their property. – be financial. Using tools such as facial recognition technology and a winning combination of network, device, document, video, biometric and behavioral data can be highly effective in providing fast and accurate fraud prevention and real-time identification.

To address AML and KYC challenges, most compliance programs will need to include an identity verification solution to help businesses confirm the identity of their customers and deter fraudsters. Organizations should implement an effective identity verification system capable of verifying users based on identity documents to track potentially high-risk customers and enable businesses to take action when needed. Some comprehensive AML and KYC solutions are available that offer PEP and sanctions list checks, adverse media screening, and ongoing monitoring to help organizations stay fully compliant with regulators and protect fintech companies from bad actors.

And after?

Identity verification is absolutely essential for the financial services industry, and this need will only grow. But in today’s digital world, our identities are more complex than government-issued IDs. An identity can cover everything from licenses to degrees, SIM cards to credit history, and is often scattered across the internet. In the future, identity verification solutions will need to cover a full spectrum of identities to transparently and accurately confirm that consumers are who they say they are.

In an ideal world, more online activity shouldn’t mean more risk and fraud. Yet we find ourselves in a situation where this is the case, and concepts such as AI-based video editing and augmented video processing that were once obscure are easily accessed by bad actors to harness the power of video. deep learning and advanced AI to mask, anonymize, and edit images and videos. Amid financial and crypto market volatility, federal regulations, and an ever-changing economic situation, it’s clear that having the right identity verification tools will remain vital to keeping the financial industry afloat.

About Janer Gorohhov

Janer Gorohhov is the co-founder and chief product officer of Veriff, the leading AI-based verification platform, ensuring its verification engine continues to evolve. An innovation enthusiast and tech savvy who started his career as a full-stack developer, Janer holds a degree in Computer Science and Information Science from the University of Tartu.

About Verification

Veriff is a global online identity verification company that enables organizations to build trust with their customers through accurate and automated online IDV. Veriff’s intelligent decision engine can analyze thousands of technological and behavioral variables in seconds, matching people to more than 10,000 government-issued IDs in more than 190 countries.


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