Financial criminals are becoming increasingly sophisticated in the digital age, requiring organizations to adopt novel strategies for combating corruption. In our ongoing series, we delve into the potential of the digital ID revolution to combat financial crime and improve the KYC due diligence process.
In today’s digital era, financial institutions must adapt to the evolving landscape of corruption. The rise of digital identity solutions to counter financial crime is gaining momentum, driven by factors such as improved connectivity between entities.
Refinitiv is at the forefront of this movement, offering swift and reliable digital ID verification and screening through seamless API technology as part of the #FightFinancialCrime initiative.
According to our 2018 True Cost of Financial Crime survey, a staggering 47 percent of organizations have fallen victim to financial crime. Notably, 55 percent of publicly listed companies and 45 percent of private companies encountered financial crime in their global operations within the year preceding the survey.
Beyond the financial toll, it is essential to consider the broader societal and humanitarian consequences of such widespread corruption. Patricia Moreira, Managing Director of Transparency International, highlights that “corruption is a global phenomenon with far-reaching effects on nearly all aspects of people’s daily lives.”
Transparency International’s annual Corruption Perceptions Index revealed that in 2017, most countries made little to no progress in combatting corruption, with two-thirds scoring less than 50 on a scale of 100.
Given the pervasive nature and devastating consequences of financial crime, coupled with the increasing sophistication of criminals, the financial services sector must respond with renewed effectiveness.
Securing Digital Transactions
Criminals are increasingly targeting financial institutions as hubs for generating illicit funds through activities such as account takeovers and cybercrime. One critical area deserving attention is the payments industry.
Refinitiv, in collaboration with the Emerging Payments Association and Barclays, has published a report suggesting best practices for combating corruption, particularly in the payments sector. These measures include rigorous Know Your Customer (KYC) screening and continuous monitoring of third parties, underpinned by reliable data sources.
Cutting-edge technologies like machine learning and behavioral analytics can be harnessed to detect unusual behavior or anomalies. The report also advocates for a common digital identity solution as the next step in bolstering the security of digital transactions, emphasizing that “digital identity in the UK is a core enabler for the widespread adoption of digital services, offering both convenience and security for users.”
Embracing the Digital ID Revolution
The digital ID revolution is on the rise, driven by factors such as regulatory mandates for consumer privacy, evolving consumer demands, technological innovations, increased use of digital channels, and improved connectivity between entities. However, the primary impetus behind this transformation is the urgent need to protect against highly sophisticated financial criminals.
In response to this digital revolution, Refinitiv is actively investing in and developing new digital solutions that provide rapid, dependable identity verification and screening via API technology.
KYC and the Customer Experience
Traditional, often paper-based KYC customer due diligence processes can be time-consuming, inefficient, and costly, often leading to heightened customer frustration levels. Balancing complex data handling and privacy regulations against conducting thorough due diligence poses a significant challenge. Additionally, ensuring the security of confidential customer data while providing a smooth and speedy service is critical.
For tech-savvy consumers who expect swiftness and frictionless experiences, methods like passwords and knowledge-based authentication can be highly frustrating.
The Power of Collaboration
While the digital ID revolution offers solutions to immediate challenges in the KYC space, the ultimate key to winning the battle against financial crime lies in extensive collaboration and a commitment to sharing insights and best practices. This collective effort can outsmart even the most sophisticated financial criminals.
Moreira supports this perspective, stressing that “corruption is a complex phenomenon involving various actors and factors. To effectively combat corruption, we need engagement from different actors in the public sector, private sector, and civil society.”