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Tools & Trends


10 Tools to Help Your Fintech Product Thwart Money Laundering and Fight Fraud

Abby Milan

October 05, 2021

Money laundering schemes: Great fodder for your Showtime binge, bad news for your Fintech product. Fail to prevent customers from using your product for illegal activity and your product’s story could serve as inspiration for the next hit drama series. That, or else cause you to go bankrupt because of the fines for not complying with regulations.

You probably know about some of the regulations you need to follow to ensure you’re not aiding and abetting. Luckily, there are many safeguarding tools out there to help you out.

Get familiar with tools to keep you on the couch and off of prime time.

How to Make Sure You’re Complying With KYC Regulations (or, Knowing Your Customer)

Know Your Customer, or KYC, is the regulation that requires you to have steps in place to verify your user’s identity. The tricky thing is, it’s up to you to decide how diligent you want to be about it. Be thorough and you could protect your product from fraud and sinking losses from illegal activity. Do a haphazard job, and you could find yourself in legal trouble because of a rogue user with a criminal mind.

KYC processes establish user identity, ensure the legitimate source of your user’s funds, and cut down on identity fraud. There are three ways you can go about KYC compliance.

taking picture of an ID using mobile phone

  1. Customer Identification Program (CIP) A CIP is a procedure that requires identity verification for every individual that completes a financial transaction through your product. It works like this: To open an account your user has to submit their name, date of birth, address, and ID number like a social security number. Then, it’s up to you to verify that identity in a reasonable amount of time. This limits money laundering, funding for terrorism, and other scary ways your product could be misused. structure with checkmarks and magnifying glass

  2. Customer Due Diligence Besides knowing your user, you need to know you can trust your user. One way to find out if your user isn’t trouble is by going through three levels of what’s called “customer due diligence” or DD for short. There’s simplified DD (information collected to assess low-risk money laundering or terrorist funding), basic customer DD (information obtained for all users), and enhanced DD (additional information collected for high-risk users for a deeper understanding of the how and why of using your product). Since risk level can change over time, it might not make sense to do an enhanced due diligence check right now, but in a few years. man using telescope and monitoring account

  3. Ongoing Monitoring Keeping a close eye on your users lowers the risk of your product being used by criminals. It could look like performing oversight of financial transactions for spikes in certain activities, spotting unusual cross-border activities, or even news stories. If you see any unusual activity, you can submit a Suspicious Activity Report.

The trick is to find the intersection between what is most impactful to your users, what you are uniquely positioned to do, and what your strengths are as a team. That’s where the greatest impact lies.

10 Anti-Money Laundering and Know Your Customer Tools to Make Your Fintech Product Safe and Easy-To-Use

It’s ok if trying to prevent your product from being used for illegal purposes seems daunting. Because it is. There’s a whole wide world of crime out there waiting to exploit products that don’t have their guard up.

We’ve rounded up the best tools to help you comply with KYC regulations and anti-money laundering (AML).

  1. PlaidYou likely use a Fintech product that is already integrated with Plaid, like Venmo. This financial tool is super popular, aggregating financial institutions into one account. You can pre-fill information by grabbing the information from your user’s bank account (one less step for them!) and build a more complete customer profile by comparing customer data from multiple financial institutions. Use Plaid to connect your user's bank account info to your product, and you have a solid backup in security.

  2. CognitoDesigned by developers, for developers so it addresses common API frustrations, Cognito's smart identity verification services and compliance solutions are quick and easy to integrate. Cognito provides such a good user experience that they were recently acquired by Plaid!

  3. AlloyAlloy wants to make sure you’re bringing on customers that work for your company. They’re a single-API KYC tool that helps banks and fintech companies automate their decisions for onboarding, transaction monitoring, and credit underwriting.

  4. VeriffVeriff boasts 6-second response times to help you ensure customers are who they say they are, from anywhere in the world. And so that you can be sure you’re partnered with a leader in identify fraud prevention tech, they’re constantly investing in innovation that aids in stopping known bad actors, flagging repeat attempts, and analyzing fraud patterns.

  5. Unit21This product-led company (with two-thirds of the team in product and engineering) transforms risk and fraud into a competitive advantage. The no-code platform helps you ward off risky customers through a dashboard that detects and manages money laundering, fraud, and more across industries.

  6. SocureMinimize fraud risk and make your onboarding process speedy at the same time with this tool focused on all types of identity verification.

  7. LemonWayDon’t let fraud sour your product. Get instant verification and identity confirmation with this tool. It offers instant KYC for individual accounts and "classic" KYC solutions for corporate accounts.

  8. Know your customerWant monitoring, identity verification, and reporting done for you? This tool does it all.

  9. IdnowIf you could lean on a tool that makes your KYC process less of a time and money suck, would you? That’s what IDNow can do. It has tools for customer ID verification, video online identification, and digital document signing.

  10. SeonDiscover suspicious accounts, troubling transactions, and questionable movements of money without adding unnecessary friction to your product’s user journey with Seon.

There you have it. Digital tools that can help you fight crime and keep your product used the way you intended. Sorry, but you’ll have to find another way to get on a Netflix documentary. Maybe for creating a revolutionary Fintech product? We’ll bring the snacks.

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