New research by PIF reveals how innovative technology is successfully thwarting and discouraging criminals seeking to use e-money or prepaid financial services to launder money or commit fraud.
PIF, the not-for-profit body representing the prepaid and fintech industries, reports that as the market for e-money products grows (including prepaid bank accounts and digital wallets), so does the potential for attempts by criminals and terrorist groups to harness this sector for their own aims.
However, a detailed review of the sector’s KYC compliance measures, produced in association with identity verification specialist, HooYu, shows that prepaid and fintech firms are winning the war on identity fraud thanks to a wide range of innovative technologies combined with best practice principles, due diligence and governance.
Diane Brocklebank, spokesperson for PIF, says:
“The sector is at the forefront of developing innovative financial services to harness new technology in ways that better meet customer needs and changing lifestyles.
“As an industry, we are also very aware that this innovation needs to go hand-in-hand with proportionate compliance measures to prevent its misuse by those seeking to move money for criminal and terrorist purposes.
“In order to track progress against this objective, PIF has undertaken a detailed review of the technologies and procedures being used to on-board new customers.
“The results highlight the sector’s success at balancing the need for compliance with providing an optimum user experience by allowing legitimate customers to get up and running (in the majority of cases) within 15 minutes. Those requiring additional security can be cleared as quickly as possible (100% in 2 days) or, in the case of dishonest users, refused.”
The survey includes businesses representing the full spectrum of e-money and prepaid providers, varying in size, product and business model. The research found that 100% of prepaid fintech firms are achieving Customer Due Diligence compliance requirements, with many firms going above and beyond minimum compliance requirements.
Of those applications failing initial database checks, 14.3% are cleared to be opened within 15 minutes and 100% of valid applications are cleared within 2 days, dependent on the speed at which applicants return appropriate documentation.
An increasing number of prepaid fintech firms use a range of innovative techniques that are harder to cheat (especially when used in combination) but are still quick and easy for customers without damaging the customer’s digital journey.
For example, 43% of checks will use geo-location to check the customer location tallies with the data given in their application. Even newer technologies are being used whereby 57% of firms will examine the applicant’s digital footprint and social media accounts to gain further confidence in the customers’ identity.
David Pope, Marketing Director at HooYu, which advised on the research commented:
“It’s important to show the extent that regulated firms use innovative KYC technology to quickly identify and accept genuine users whilst also cracking down on potential criminal activity.”
PIF’s findings are corroborated by the recent Financial Conduct Authority (FCA) report on Money Laundering and Terrorist Financing Risks in the E-Money Sector. The report, published in October this year, found that the sector had effective controls and a good culture of compliance.
Diane Brocklebank, added:
“The FCA’s comprehensive review is a great endorsement of the work being done to tackle potential crime.
“It found that the majority of firms they visited had effective anti-money laundering systems and controls to mitigate money laundering and terrorist financing risk. Also, that there was good awareness and understanding of financial crime and that firms generally demonstrated a low financial crime risk appetite with financial crime prevention “well embedded” in company culture.
“The majority of firms with outsourced distribution of e-money and compliance to programme managers had adequate governance and audit measures to manage the risks.”
Download the full report by visiting: https://hooyubusiness.com/prepaid-fintech-kyc-technology-report/
NOTES TO EDITORS
Summary of PIF Findings:
- 100% of PIF member organisations surveyed conduct manual ID document collection and review, with 57.1% using an external ID collection service
- Types of checks:
- 100% use database checks
- 100% use ID document validation
- 85.7% carry out PEPS & sanctions checks
- 85.7% use address validation
- 71.4% use previous fraud history
- 71.4% use fraud rules
- 42.9% use geo-location
- 28.6% use device reputation
- Platforms/tools used:
- 71.4% use data brokers
- 57.1% use social media
- 14.3% use video ID
- 39.17% undergo further due diligence measures
- Of those requiring KYC, 62.5% are successful with one process whilst 65% are successful in account opening with multiple processes
- When database checks are successful, 100% of accounts are opened within 15 minutes
- When database checks are unsuccessful, 14.3% of accounts are opened within 15 minutes. 100% are opened within 2 days, with time taken dependent on the speed of documentation being returned by the applicant
- 39% of online applications are started but not completed
PIF is the not-for-profit industry body representing organisations who are regulated under e-money and payment services legislation and who operate in the high-growth prepaid and fintech sectors. Prepaid technology underpins a vast range of financial products, from everyday payment accounts and challenger bank accounts to corporate incentive and expense management solutions.
Driven by a belief that prepaid delivers a wealth of financial and social benefits, PIF was formed in 2007 with a mission to protect and advance prepaid as a driving force for innovation in financial services.
To learn more about PIF, please visit www.paymentsinnovationforum.org and follow us @prepaidintforum
About HooYu – for further information, visit www.hooyubusiness.com
HooYu is a leading provider of identity confirmation and fraud investigation products.
HooYu Identify is a global identity confirmation service that blends and combine multiple identity technologies including social media and digital footprint analysis, identity document authentication, facial biometrics, database checks and PEPS and Sanctions watchlist checks to confirm identity. HooYu cross references and analyses data from a person’s digital footprint to confirm their real-world identity.
HooYu Investigate is a ground-breaking investigation platform that evolves traditional database search into a navigable graph which connects 150 million people records, 14 million businesses, 32 million UK addresses, 57 million phone numbers and 18 million email addresses.
For further information:
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