ID Verification Simplified: How to Select the Right Tool | FinCEN Warns Banks of Heightened Iranian Support for Terror Groups | Canada fines Binance $

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Welcome to our AML News and Updates Newsletter May 2024 edition. ??

Stay up to date with main AML news and updates in less than 10 minutes per month!

This newsletter is brought to you by IDnow, and their innovative Videoldent Flex verification solution which seamlessly integrates human review with machine automation for a streamlined onboarding process with robust fraud protection.

Are you concerned about the growing threat of scams? Join IDNow’s FREE webinar: “Unveiling Britain's Fraud Landscape: Harnessing Human-Machine Harmony to Combat Scams” to learn how human-machine collaboration can revolutionize fraud prevention efforts! You can register here.

Let's see an outline of the topics to be covered in this edition:

1. Discussion of the month: ID Verification Simplified: How to Select the Right Tool
2. Regulatory Developments:

? FinCEN Warns Banks of Heightened Iranian Support for Terror Groups

? EU adopted new rules to combat money-laundering

3. Other News:

? Canada fines Binance $4.38 mln for money laundering violations

? Cryptocurrency Mixing Service Was Shut Down by Authorities

? Drug Ring Taken Down: Europol Arrests 20, Seizes €10 million

? Death Sentence to the Chairwoman of a Real Estate Giant in Vietnam

Let's start...

ID Verification Simplified: How to Select the Right Tool

The digital revolution has made remote onboarding a common practice across industries.?Financial institutions,?fintech companies,?and even membership platforms now leverage its convenience and efficiency.?However,?a crucial challenge remains:?ensuring the customer's identity.

Why is this so important??

Compliance with anti-money laundering (AML) regulations is just one reason ID verification. Fraud, causing significant financial losses every year to financial institutions and eroding customer trust, is another major concern.

The Evolving Threat Landscape

Verifying IDs used to be a simple check for authenticity and that was enough for a long time. However,?fraudsters have become more sophisticated.?Stolen documents,?deepfakes (realistic videos of non-existent people),?and synthetically generated IDs pose a serious threat to financial institutions. Traditional ID verification methods are no longer enough.

Choosing the Right Tool

The good news??ID verification solutions have evolved alongside the threats.?Here's a breakdown of options,?starting with the most basic and cost-effective,?to help you choose the right fit for your security needs:

Document Authenticity Checks:

This is the foundation of ID verification,?confirming that the document itself is genuine.?Here's what it typically offers:

• Optical Character Recognition (OCR):?Extracts data like name,?date of birth,?and ID numbers.
• Database Verification (where permitted):?Cross-checks extracted information against government databases for validity.
• Security Feature Detection:?Analyzes the ID for features like holograms and watermarks.

While this provides a baseline,?it doesn't guarantee a real person is presenting the ID.

Liveness Detection: Going Beyond the Document

Liveness detection uses AI and machine learning to confirm a real person is present,?not a static image or video.?Here's how:

• Facial Liveness Detection:?Analyzes facial features and movements to ensure a real person holds the ID,?not a photo or deepfake.
• Challenge-Response Mechanisms:?These prompt users to perform actions like blinking or tilting their head,difficult to replicate with a photo.

Advanced Security Layers:

For even stronger verification,?some solutions offer additional layers:

• Multi-Factor Biometric Authentication:?Uses additional biometrics like iris scans or fingerprints for high-security needs.
• Database Verification (where permitted):?Cross-checks user information against external databases of watchlists,?stolen documents,?etc.?(with legal considerations).

Cutting-Edge Solutions:

These options are best suited for very high-risk situations:

• Automated NFC verification for eID:?Uses NFC technology to securely transmit information from electronic identity documents (eIDs) on a user's device.
• Expert-Led Video Verification:?A trained specialist conducts the verification process via live video call,assessing the document,?performing facial recognition checks,?and asking additional questions.

Finding the Right Balance Through Risk-Based Verification

The key to selecting the most suitable ID verification solution lies in understanding your risk profile.?Through a thorough risk assessment,?you identify vulnerabilities associated with remote onboarding in your specific industry.

Start by Performing a Risk Assessment

This assessment considers factors like:

• Industry:?Regulations and risk profiles vary across industries.?Financial services face stricter requirements compared to a membership platform.
• Customer Base:?Who are you typically onboarding??Higher-risk demographics or transactions might necessitate stronger verification.
• Transaction Type:?The level of risk associated with your transactions matters.?High-value transactions might need more robust verification than low-value purchases.
• Regulatory Requirements:?Understand the AML and KYC regulations that apply to your business and the specific verification requirements they outline.

Risk Assessment Informs Your Choice

Once you have a clear picture of your risk profile, you can leverage it to choose the optimal ID verification solution. Here are some examples what you can consider:

• Low-Risk Scenarios: Lighter verification checks (Example: Basic document authenticity checks with fundamental liveness detection if appropriate)
• Medium-Risk Scenarios: Additional level of verification (Example: adding database verification - where permitted - and potentially challenge-response mechanisms with facial liveness detection.
• High-Risk Scenarios: Explore more sophisticated solutions (Example: multi-factor biometric authentication or expert-led video verification for the strongest verification) even if it means a more involved process for the customer.

(Disclaimer: The examples provided are for illustrative purposes only and may not be applicable to all situations. It's crucial to consult with AML/KYC experts to determine the most suitable verification measures for your specific risk profile and regulatory requirements.)

Finding the Optimal Balance

The ideal ID verification solution strikes a balance between robust security and a seamless customer onboarding experience.? To find an appropriate solution start by understanding your risk profile. Then, you can tailor your verification process to effectively manage potential fraud while still providing a smooth experience for your customers.

FinCEN Warns Banks of Heightened Iranian Support for Terror Groups

The Financial Crimes Enforcement Network (FinCEN) issued an advisory on May 7,?2024,?urging U.S.?financial institutions to step up their vigilance against transactions potentially linked to Iranian-backed terrorist organizations.

The advisory provides insights on:

• Funding methods employed by Iran
• How Iran funds itself
• Hot Iran moves money
• Red flags for detecting suspicious activity.

Read the FINCEN report here.

Uncover how this impacts your business with our easy-to-understand analysis.

EU adopted new rules to combat money-laundering

The European Union (EU) has adopted a new set of laws to strengthen their ability to fight money laundering and terrorist financing.

Under the new rules:

• Authorities, journalists, civil society organisations, will have access to beneficial ownership registers.
• There will be a new EU limit on large cash payments up to EUR10 000
• Due diligence rules will apply to football clubs and their agents from 2029 onwards.
• AMLA will directly supervise riskiest entities.

Read the official announcement here.

Canada fines Binance $4.38 mln for money laundering violations

FINTRAC announced today that it has imposed an administrative penalty of $6 million on Binance Holdings Limited for non-compliance with Canada’s Anti-Money Laundering (AML) Regulations.

Binance holdings has committed the following violations:

• Failure to register with FINTRAC as a foreign money services business; and
• Failure to report large virtual currency transactions of $10,000 or more in the course of a single transaction, together with the prescribed information.

See official announcement here.

Cryptocurrency Mixing Service Was Shut Down by Authorities

Samourai was a mobile cryptocurrency wallet with features designed to enhance user privacy. It allowed users to store their private keys for Bitcoin and conduct transactions. But the mixing service was recently shut down by authorities.

The founders, Keonne Rodriguez and William Lonergan Hill were charged with conspiracy.

Learn what is a cryptocurrency mixer and how it works here.

Drug Ring Taken Down: Europol Arrests 20, Seizes €10 million

According to Europol, an intercontinental criminal network involved in drug trafficking and money laundering was dismantled in a joint operation by Spanish and Portuguese authorities. 20 members were arrested, and over €10 million in laundered money was seized.

Read our analysis on how the network exploited specific tactics to bypass the safeguards of financial institutions.

Death Sentence to the Chairwoman of a Real Estate Giant in Vietnam

Truong My Lan, 67, the former chair of real estate giant Van Thinh Phat by a court in Ho Chi Minh City was convicted to death for one of the largest financial fraud case.

Lan orchestrated a complex money laundering scheme to divert funds from a bank she indirectly controlled to thousands of shell companies she owned.

Read our deep-dive analysis to understand:

• How the real estate industry was misused in this case.
• Lessons learned for Compliance Proffessionals
• Red flags to watch for.

Read more articles on Substack

In case you are not a premium subscriber, here's what else you have missed:

• False Positives in Transaction Monitoring – What We Can Do Better
• Cash Smuggling: How Criminal Networks Exploit Loopholes
• Can You Spot Illegal Wildlife Trade?

• Why Compliance Officers Can Be Great Leaders (and How)
• Conflict Management in Compliance: How?
• How Personal Branding Can Attract Clients and Opportunities

There were many more interesting news recently, however, these are the ones that drew my attention, and wanted to share them with you!

Stay tuned for more AML News and Updates! ??

Best

Anna

Founder

AML Cube Consulting and Education