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KYC (Know Your Customer) is a critical aspect of preventing fraud and ensuring the safety of both businesses and consumers. The importance of KYC is evident in the number of regulations and laws that have been put in place to mandate its implementation. Despite the importance of KYC, many businesses still consider it a premium service and only implement it when necessary. However, the truth is that KYC is not just a necessary tool, but a must-have for businesses looking to protect themselves and their customers from fraud.

Cybersecurity and KYC in today’s online world

Globally, it is estimated that $800 billion to $2 trillion USD is laundered annually, which equates to 2-5% of the world’s GDP. Financial institutions, including banks, are commonly used for this type of criminal activity. They are also used for terrorist financing and other illegal activities. Consequently, multiple layers of anti-money laundering (AML) techniques are necessary to prevent, detect, and defend against financial crimes.

The KYC practice has long been a requirement for financial services. This involves the verification of a customer’s identity according to legal and regulatory standards. Recently, strict regulations, such as the Fifth Anti Money Laundering Directive (5AMLD) and the Electronic Identification, Authentication and Trust Services (eIDAS), have been introduced to ensure the security of the KYC process.

Although initially utilized primarily by financial and banking services, along with related sectors such as insurance, real estate, and trading, KYC requirements are becoming increasingly essential for nearly all online transactions. This is due to a rise in fraudulent activities, even in newer industries.

KYC in the gaming industry

Several industries are now adopting KYC. These include online gaming and live streaming. Major online gaming platforms now include their digital economies and currencies that allow players to make in-game purchases using real money. As a result, these platforms possess numerous personal and financial data that fraudsters aggressively attempt to exploit. According to a report by Akamai Technologies, cyberattacks targeting the video game industry increased more than any other industry. This was especially true during the COVID-19 pandemic, with over 240 million web application attacks in 2020 alone. This represents a 340% increase from the previous year. Personal data and identity theft, in-game gambling and corruption, and the use of stolen cards are just a few examples of the types of crimes that can occur in these online platforms.

One notable instance involves Twitch, a large live-streaming company used by a Turkish money-laundering ring to steal $10 million USD over two years. The scheme involved the participation of 2,400 young Turkish streamers. They were approached by fraudsters to receive stolen money in the form of Bits, Twitch’s online currency for donating to livestreamers. The streamers would then refund the donation through various bank accounts. They would then keep a small percentage for themselves. The authorities only discovered the scheme when they noticed that these lesser-known streamers received disproportionate donation amounts compared to their small audiences.

Gaming studios must prioritize combating fraud and criminal activity on their platforms. One effective method being KYC practices, which can aid in anti-money laundering protection. For example, implementing stronger KYC practices when users purchase or donate in-app currency on Twitch could have helped prevent the aforementioned fraudulent activity.

KYC in the gambling industry

The online gambling industry is experiencing rapid growth. With a market value of nearly $59 billion USD and projected to reach $92.9 billion by the end of 2023. The convenience of playing games such as casino, poker, and sports betting via mobile devices has expanded their reach globally. However, this popularity also attracts fraudulent activities, and TransUnion’s 2021 iGaming Report highlights identity as the main source of fraud in this sector, with a 43% increase in online gambling identity fraud in 2021.

Fraudulent activities in online gambling include multiple account fraud, bonus abuse, gnoming, chip dumping, stolen credit cards, chargebacks, and phone top-up abuse. As with any business handling significant financial transactions, online gambling sites must also avoid facilitating money laundering activities. Non-compliance with regulations and fraudulent activities can result in significant consequences, including loss of revenue and resources, penalties, damaged relationships with payment processors, and a decline in customer trust and loyalty.

To minimize risks, gambling businesses should conduct customer due diligence by implementing know-your-customer (KYC) practices and identity verification at each step of the online journey. This can help monitor player activity, flag potential issues, and enable prompt responses to fraudulent activities.

KYC in the travel sector

In 2019, fraudulent activity caused a substantial loss of $21 billion USD to travel companies. This trend can be attributed to several factors. Included is the significant increase in travel, the high value of online transactions, and the vast number of suppliers worldwide. These factors, coupled with the ever-present threat of cybercrime, create a perfect environment for fraud to occur in the travel industry.

The most frequently observed types of fraud include stolen payment method details. They also include cyberattacks targeting online booking platforms and theft of security credentials. Transactions involving foreign credit cards carry the highest risk of customer fraud. This makes it imperative for travel companies to exercise caution.

Furthermore, the COVID-19 pandemic has introduced new forms of fraud. This includes the sale of stolen vaccination documents containing verifiable information obtained from social media platforms. In 2020, gift cards were the most commonly used fraudulent payment method. This is likely due to their convenience in facilitating gift-giving in the absence of in-person visits.

The use of mobile transactions presents an added layer of complexity to fraud detection. This is because geolocation matches can no longer be the sole criterion for risk assessment. Instead, multiple authentication factors are now necessary for safe verification of customer identities.

How can Faceki help?

At FACEKI, we understand the importance of KYC. We have made it our mission to provide businesses with a user-friendly and effective solution. Our AI-powered KYC solution provides full Arabic language support, making it accessible to a wider audience. The liveness check feature is also designed to be user-friendly. There would be no need for users to smile or do any specific moves.

We understand the need for speed and efficiency. This is why our KYC solution is able to verify identities in just 30 seconds. Our solution also provides the option for “Zero Integration”. It allows businesses to verify users without the need for integration. This option includes the ability to generate links and send single or bulk SMS, making it a convenient solution for businesses of all sizes.

For businesses that do choose to integrate, our identity verification solution can be fully integrated into apps, websites, and desktop applications. This enables businesses to verify user identities while also complying with KYC regulations. Our solution is ISO 30107-3 certified. Furthermore, it has undergone thousands of presentation attack tests (PAD) to ensure its security.

At FACEKI, we are committed to maintaining the highest level of security for our customers. Our solution undergoes regular security audits, vulnerability scans, and penetration tests to ensure compliance with security best practices and standards. 190+ countries are supported and automatic and manual AML/PEP checks included. FACEKI is trusted by thousands of businesses around the world.

KYC is not just a necessary tool, but a must-have for businesses looking to prevent fraud and protect themselves and their customers. With immediate results on the dashboard, and the option for zero integration, there has never been a better time to implement KYC and protect your business.

Contact us today to schedule a demo!