With modern technological developments, digital transactions have become a part of our daily lives. As a result, Internet users are increasing, and cyber threats are growing in parallel. Consequently, cyber threats have become a part of everyday life for individuals, governments, and organizations. Traditionally, cyber threats have been isolated from attacks on computer systems to a large extent with antiviruses and firewalls. According to the Accenture State of Cybersecurity Resilience 2021 report, cyber threats increased by over 30% between 2020 and 2021. Cybercrime poses a significant threat to businesses and is estimated to reach $10.5 trillion in 2025.
With the coronavirus, millions of businesses have transformed their working way to online, and for cybercriminals, it's no longer just individuals who are victims. While all companies are under threat, most of them missed the critical point that money laundering, along with financial transactions, has become digital. The survey, conducted by Check Point Software & Dimensional Research, showed that 71% of IT and security professionals had reported increasing security threats and attacks globally since the Coronavirus outbreak began.
Types of KYC Fraud
KYC scams occur when the cybercriminal wants to open an account, get a loan on behalf of someone else, or use fake credentials. The types of scams that cause significant distress to individuals and businesses include:
- Smishing: Smishing is a social engineering scam that uses cell phones as an attack platform. The attacker attacks to collect personal information, including social insurance or credit card numbers. Smishing is carried out via text messages or SMS.
- Identity Fraud: The use of personal information such as passwords, identification numbers, credit card numbers, or social security numbers in the victim's name in a fraudulent manner. Another type of identity theft that captures users' sensitive information for many illegal transactions is synthetic identity theft.
- Phishing: Scammers steal personal information or interfere with online accounts using misleading emails, messages, advertisements, or sites that look like the ones the victim is using.
- Fake re-KYC: Scammers pretend to be from a legitimate organization, asking customers for up-to-date KYC information, such as passport information.
Cyber Security and KYC
KYC is now an essential requirement for financial institutions. According to the Experian 2020 Global Identity and Fraud Report, 57% of businesses reported fraud losses related to account opening and acquisition. This data clearly shows us that cyber threats have infiltrated the KYC process and that KYC processes need an additional layer of protection. Integrating cybersecurity with automated KYC systems allows businesses to protect their employees, customers, and system.
With KYC compliance, businesses can build trust with customers. There are several ways to implement KYC beyond regulatory requirements:
- Knowledge: Increasing the number and difficulty of questions companies use to verify online identities.
- Documentation: Identification of documents with the use of artificial intelligence and machinery.
- Biometrics: Using fingerprint, voice, and facial features to verify a customer's identity.
- Database Reference: The use of all online databases, from social media to credit bureaus, to verify the customer's identity.
Customers are counterparties in cybersecurity strategies and must take steps to protect businesses' information online. Since customers are vital to companies, their safety is always a priority. But customers don't like long identity verification processes. Extremely strong entry-level authentication can have negative consequences on the customer experience. By applying pre-screening KYC verifications, Companies can achieve low KYC friction. Pre-screening KYC verifications include; email verification, device identity intelligence, and phone ID.
How to Match KYC to Cybersecurity Policy?
1. Increase Cybersecurity and KYC Awareness
One of the first ways to avoid fraud is to increase knowledge and awareness. Acquisition of misinformation and lack of awareness lead individuals and businesses to take the wrong approach to cybersecurity. Companies should understand the reason for verifying identities, the KYC process, and how they protect customers against threats and explain to customers. ın this rapidly digitalized world, these processes continue to increase its importance.
2. Improve Data Security
The decision-makers of the enterprises, who could not foresee that the pandemic process would last long, were the main target of the increasing fraud during this period. Business executives are also responsible for the rise of cyber fraud, who do not consider additional digital security measures and e-KYC training for staff necessary during the pandemic.
They may lose control of either when developing an automated KYC process while forwarding certain strategic parts and data about the hiring process. The old methods used in due diligence, combined with blind trust and scanning of inanimate documents, can put managers at risk of blackmail.
Data security is threatened and damaged when the KYC process is done with outdated technology and methods. With AI and machine learning, businesses can analyze documents in real time. These learnings provide companies with security risk assessment and problem-solving competencies.
3. KYC Staff Training
It was unclear how much ever-changing KYC roles affected cybersecurity missions. First, it became clear that KYC staff, who only identified the at-risk client at the time of recruitment, needed to evolve and receive technological support as time passed and scandals increased. KYC staff cannot be expected to detect fraudsters without cybersecurity training and technical support. The KYC team, which does not receive efficient training and is not checked in terms of updated knowledge every year, can create problems within the enterprise after a while.
It has become apparent during the pandemic that cybercriminals escalate their attacks in the most uncertain and complex moments. In this high-risk technological age, the training of KYC personnel should not be left in the background.
In addition, with our AML Screening and Monitoring tool, companies can easily perform Customer Due Diligence, and Enhanced Due Diligence KYC procedures in accordance with all obligations. All operations also provide Sanction Scanner with strong API support. With Sanction Scanner, scans can also be done in seconds via the web, API, or batch search. For detailed information, talk to us, or request a demo.