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Digital KYC: A Firewall against Online Frauds and Scams

Digital KYC: A Firewall against Online Frauds and Scams

The rapid expansion of digitization in our daily lives has led to a surge in online fraud and scams. Financial regulators have implemented Know Your Customer (KYC) procedures to stop terrorist attacks, bank fraud, and money laundering by dishonest actors who look for unsuspecting consumers online and use them as easy targets by reading emails or clicking bogus links. Although digital KYC can be a burden for customers, it makes things simpler for law enforcement, who can more easily trace criminals with this information.

Banks have cautioned customers against fraud committed under the guise of KYC updates and encouraged them not to divulge sensitive information, such as account information or passwords, to unknown individuals or organisations.

Companies can build and sustain connections with customers, clients, and other business entities by implementing KYC (Know Your Customer) practices.

Describe KYC

The process known as “Know Your Customer” (KYC) is used by businesses to confirm the identification of their customers in accordance with legal requirements and current laws and regulations. It is an essential step in the process of preventing financial crimes.

When a customer creates an account for the first time with a business and on a recurring basis after that, KYC verification is completed. Simply said, it is done to make sure that the individual using an organisation’s services is a real person.

If an individual does not match the minimal KYC criteria, financial institutions may refuse to open an account for them.

There has been an unexpected growth in security worries since the introduction of the Internet and as more people rely on technology. To safeguard themselves and their customers from fraud, business owners must maintain their security measures and educate their clientele. Financial institutions are more adept at confirming the information of their clients, therefore KYC serves as a disincentive.

The KYC standards outlined by banks demand all essential efforts to confirm the legitimacy of their customers. In order to verify that a client is a real person who exists and is not a part of any illegal or criminal activity, these procedures include checking a customer’s name, address, and identifying documents such as ID cards, passports, and utility bills.

Banks are required by law to abide by KYC rules and anti-money laundering guidelines. Banks adhere to these requirements in accordance with current AML laws and regulations. If they violate, they may be subject to severe fines.

Online KYC Fraud Cases

Identity theft, data mining, fishing, and fraudulent online KYC are the most prevalent types of cybercrime. In order to acquire illegal access to users’ accounts, scammers trick unwary users into sharing their personal information (which may include card information, account login credentials, OTPs, etc.).

Some cases are:

  • In order to pretend to be a bank or company representative, fraudsters gather information from social networking sites like Facebook, LinkedIn, and Twitter. They then ask users to verify their accounts by supplying critical information.
  • Customers are also lured into scam calls by callers who demand that they install dangerous programmes and divulge a code in order to defraud them, take their money, or obtain personal information.

The Frauds Businesses Experience

In addition to online KYC fraud, organisations must deal with a number of other frauds. Some of them are listed below:

Fraud involving liveness:

Liveness detection is crucial in confirming many people’s identities. However, sophisticated scammers are able to evade this verification method. By using stolen IDs and pre-recordings, fraudsters can manipulate systems, especially bank KYC systems. Very few businesses provide defence against them.

Card fraud: 

By tricking customers into giving over their OTPs, fraudsters can obtain card numbers from their insider sources and use them to commit fraud.

Fraudulent fake government websites: Several phoney websites attempt to pass as official government websites, offering a variety of schemes via web portals. Fraudsters seated further back take advantage of the initiatives to provide free equipment, subsidies, and financial rewards. They con individuals into paying all kinds of fees and stealing their money.

Identity theft: 

Identity theft can be committed in a number of methods, including gaining login information for accounts, utilising forged documents, phoney names, and fake signatures. It can be used to acquire alcohol, make unlawful financial gains, or even pass as someone else.

How Can These Online KYC Frauds Be Prevented?

When it comes to fraudulent acts, con artists frequently profit from people’s ignorance. By raising client knowledge, online KYC frauds can be stopped. Customers should be careful with the information they share online because it could be used against them.

  • Never divulge card information to anyone, including CVV, OTP, or ATM PIN/TAN codes. One must be aware that banks do not demand that customers supply such details.
  • Even if a person receives an anonymous email or SMS claiming they have won Amazon rewards and must enter their information to claim them, they should remain sceptical of the validity of this claim and refrain from following any of its instructions. Never should they open any attachments that are provided to them by email or text message for such purposes.

What is the KYC online verification process?

By visiting the websites of any KYC Registration Agency, we can also choose to comply with KYC requirements online (KRA).

  • Pay a visit to any KRA.
  • Create an account and fill it up with information.
  • Enter your registered contact number and ID information.
  • Correctly enter your OTP.
  • Upload a copy of your ID card that has been self-attested.
  • Accept the terms of the declaration.

In the end

Digital KYC is playing an impactful role in tackling online fraud and scams. Undoubtedly, every organisation should use digital KYC to prevent these attacks. Fake identities are becoming common these days that’s why it’s important to have KYC compliance software to avoid it.

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