Five ways to ensure compliance with stricter global fraud prevention regulations

Nasdaq’s 2024 Global Financial Crime Report highlights $3.1 trillion of illicit funds flowing through the global financial system. As a result, financial crime and fraud prevention regulations are being tightened up globally.

In the UK, for example, 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 lead to 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 pace with evolving global legislation on financial crime and fraud prevention 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, potential criminal charges against directors and the reputational harm that can be caused.

Five ways for financial institutions to ensure best practice compliance with stricter global financial crime and fraud prevention rules, include:

1) Obtain customer contact data quality from the start: The quality of contact data is vital 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 necessary.

Possessing 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.

Recognition that address verification – having a consistently accurate, standardised address – is at the cornerstone of contact data quality, is key. It’s much easier to match and verify identities across multiple sources with up-to-date customer addresses. 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) Employ an electronic identity verification (eIDV) platform: With fraud on the rise worldwide “always on” eIDV tools are the best way to undertake ID verification. 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 results in a good customer experience while preventing fraud.

For the best outcome it’s preferable to obtain 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. This ensures the delivery of efficient customer onboarding as part of an effective ID verification service, globally. Additionally, maturing technology is enabling eIDV to be offered at a range of affordable options.

eIDV is considerably quicker, more accurate and cost effective for undertaking ID verification and preventing fraud when compared with manual checks. It’s because using this technology requires no additional staffing or training costs, and there’s no risk of human error.

3) Know Your Business (KYB) checks are essential: KYB screening is vital to help prevent fraud because it enables suppliers to fully understand the risks posed by new and existing business customers and suppliers. Particularly when fraud is often perpetrated by shell companies or organisational structures that aren’t real. Additionally, KYB checks help prevent financial crimes such as money laundering and terror financing, which can result in considerable reputational damage.

4) Integrated sanctions data: It’s surprising how many in financial services don’t screen against sanctions lists, or have access to up-to-date versions of such data, despite the legal requirement for many to do so.

It’s important that sanctions data is collected from a wide range of trusted sources worldwide, ideally using a service that constantly scans for updates on sanctions data and provides them daily, in real-time. This automated approach is a much more efficient and accurate way to employ sanctions screening.

As part of a wider best practice approach to sanctions screening it’s vital to obtain politically exposed person (PEP) and relatives and close associates (RCA) data from around the world. This ensures that you protect your organisation against potential fraud, while avoid having customers that can damage your reputation. Due to 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 fact it’s a legal requirement for financial institutions in the UK to undertake enhanced checks of both domestic and foreign PEPs. 

5) Automated adverse media screening: It’s important that those in financial services 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, as part of a best practice approach to preventing financial crime. This requires them to obtain adverse media technology that can screen across online news sites, newspapers, magazines, TV, radio, social media and press releases.

With governments around the world implementing new rules and regulations to help prevent the growth in fraud and financial crime, it’s crucial to ensure best practice compliance with them. This requires 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.