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Sunday, September 24, 2023

Identity Proofing – Ultimate Prevention against White-Collar Crime


White-collar crime is committed for financial gain. It is a non-violent crime but the magnitude of its outcomes is quite large at times. Many white-collar crimes are prevailing in the industries in different forms. Most common white-collar crimes are money laundering, falsification of financial records, fraud with investment companies and online forex exchanges. According to a recent survey of 2018, 49% of the organizations inferred that they have been the victim of financial fraud and economic crime. 

The question is how a mere identity verification software can prevent an array of white-collar crimes?

The major motive behind white-collar crime is illegal monetary gain and these crimes are committed by the personnel of good public reputation or those which hold some high-rank position in a private or government organization, often such crimes are committed hiding behind the stolen identities. Online identity proofing and KYC/AML screening highlight the individual with a fake identity. Once a criminal has been identified as a fake person the crime is terminated at the very first stage. 

KYC & AML checks on the stakeholders of the organization reduce the threat of loss due to white-collar crime. In-depth identity proofing screens the ID proofs provided by the clients, employees, and investors create a layer of security for the businesses. 

White-collar crimes that can be prevented with identity proofing

Below are the white-collar crimes with multi-industry impact which can be controlled with the help of identity verification.

Identity verification can control money laundering:

Money laundering has been affecting numerous businesses and is a global phenomenon. Governments and regulatory authorities have been very keen on controlling and eliminating this global phenomenon. Many financial and non-financial businesses are being used to conduct money laundering on a global scale. Banks, online fintech businesses, money transfer facilitators, online gaming and gambling sites are the common victims of money laundering. Identity verification is a solution to mitigate the risk of money laundering on these platforms. Hence the reason why global AML regimes have made it necessary for the businesses to conduct identity verification on their clients before initiating business relations with them. 

Shel companies and hidden beneficiaries

Another common type of white-collar crime is the use of shell companies to convert black money into white money. It is also a type of money laundering but it is conducted in a different manner where a fake business is created instead of fake identity and the banks and other businesses are the victims. These shell companies conduct business with other legitimate businesses and once the transactions have been made, the accounting records are manipulated to cover the black money within legitimate business proceeds. Hence the other business unknowingly becomes the partner in crime. Running an identity verification on entities with whom a business maintains B2B relation prevents fraud. It also helps the businesses to start and maintain B2B relations with legitimate businesses of high value.

These are just a few use cases of identity proofing and KYC/AML checks. These identity verification solutions have the potential to prevent a number of white-collar crimes conducted under the facet of stolen identities.

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