If you are any institute that deals with the finances of people, then you are a favorite target for perpetrators. According to a study, about 18 million victims fell prey to scams through digital payment cards during the Covid-19 pandemic.
A detailed study on these crimes highlighted that perpetrators easily become successful in their proceedings due to money laundering. Increased graphs on these crimes may disclose the cleverness of launderers on the subject. However, it does not mean businesses are empty-handed to combat this threat to humanity. Technology has blessed the lives of vendors by providing them with a solution called transaction monitoring to monitor transaction behaviors of customers, which ultimately would benefit them in controlling money laundering.
Cybercrime: one of the primary problems of the internet
Along with many advantages of the internet, it has its fair share of disadvantages. There is no doubt that cybercrime is increasing with each passing day. Merchants are constantly facing cyber crimes like identity theft, cyberstalking, financial theft, and similar crimes since they have integrated automation into their businesses. The most prevalent is financial theft, which leads to felonious activities like money laundering and terrorist financing.
Money Laundering and Terrorist Financing
Money laundering reflects all the processes that transform dirty money into clean money. Launderers conceal the source of money and launder it by passing it into various commercial transactions. The game does not stop just there. Illegally obtained money is then used to finance terrorist activities like drug smuggling and human trafficking. Countries that are found executing such illicit acts earn themselves a bad name. It leaves a negative impact on their economy as well. Money laundering is written in the fate of any country that has weak or non-existent anti-money laundering laws in place.
Perpetrators always look for loopholes in the system to attack. When they fail to have practicing laws at their end, fraudsters exercise tricks to harm vendors as much as they can. This is exactly what happens in money laundering, to combat which AML (Anti-money laundering) laws are set. AML includes regulations that prohibit whitewashing illegally obtained money. In addition, policymakers designed laws for eliminating money laundering by monitoring transactions made by the customers.
Keeping a record of the financial activities of users is the first line of defense against laundering money. It is possible if vendors execute efficient customer identity verifications the time consumers come for the first time. To get rid of any unfortunate event in the future, companies must ensure the onboarding of only legitimate individuals.
Suppose any customer comes for an account opening. In that case, firms can ensure users reveal their authentic selves by employing ID verification services. After confirming the customers are whom they claim to be, institutes clarify for them to have an account in their company. The Customers financial activities kept under regular check, which can predict the future transaction behavior of the users.
Transaction monitoring enables the banks to monitor the financial activities of customers daily. The software alerts the banks regarding any transaction that is not consistent with the normal transaction behavior of the customer. In this way, organizations can immediately detect and know if the transaction is an authentic client or by an illegal person.
Compliance professionals have developed laws like Anti-money Laundering and CFT (Combat Finance Terrorism) to eradicate digital crimes. They are all part of Know Your Customer (KYC) compliance that increases threats to businesses. The foremost responsibility lies in verifying the identity of customers at the time of onboarding. Having honest people being a part of your organization reduces the chances of theft to a minimum. In addition, transaction monitoring, being part of AML, assist vendors in keeping an eye on the financial activities of customers that can ensure a fall in money laundering.
Enterprises possess a huge risk if they fail to adhere to compliance. Regulatory authorities fine them for not sticking to laws. Businesses also experience reputational damage, which eventually cost them customers’ loss. The solution to all these problems lies solely in being compliant with AML/CFT regulations, proving to be a win-win strategy for both sellers and buyers.
How does KYT assist a Business?
This is a time when we need more careful and aware of all kinds of illegal activities. Many organizations have been implementing advanced technologies to combat financial crimes. KYT verification assists in maintaining a record of transactions. It can be great also for identifying legal transactions. Every business is trying to build more and more trust for their consumers, so it’s important to consider.
Transaction monitoring is the answer if businesses want to disassociate themselves from serious crimes like money laundering and terrorist financing. Financial theft is a cybercrime that is exponentially increasing in this age. Money laundering is a crime that affects only merchants and their users, but it is an illegal activity against humanity. Companies are liable to follow laws and therefore discourage criminals in their hopes of carrying out illicit acts.