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Home » ID Verification Services – Countermeasure for Prevalent Trading Fraud

ID Verification Services – Countermeasure for Prevalent Trading Fraud

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Criminals pose various threats to industries from identity theft, account takeovers, and use of illicit funds to investment scams. Similarly, trading companies are also becoming victims of malicious intentions like conspiracy, data breaches, and the movement of illicit funds. These threats compromise the market standing of firms and cause financial downfall because they deal with high-value payments.

Due to inadequate identity verification mechanisms, trading companies also face compliance risks, market manipulation, and severe legal repercussions. In order to counter criminal threats and increase protection, they should integrate AI-powered IDV services. These mathematical algorithms offer real-time selfie-based identification, payment authorization, liveness detection, and ongoing monitoring to ensure customers are present when exchanging. 

Identity Theft Protection – Detecting Prevalent Trading Risks 

Exchange platforms have gone digital and online interaction has become the new normal for domestic and international trading. Customers contact brokers remotely and schedule the movement of goods. Similarly, the exchange of services with off-shore companies has become easier. 

According to the World Trade Organization (WTO) economists, trading volume grew by 3.5% in 2022 and will see another 1.0% rise in 2023. Considering this development, exchange companies can not risk their integrity due to insufficient identity theft protection controls. With more growth coming their way, trading firms should enhance their ID verification mechanisms to restrict investment and payment scams.

With this ease, fraud risks also surfaced in the trading industry. The involvement of intermediaries, third-party brokers, and anonymity is resulting in havoc for exchange processes as companies are unable to authenticate customers. Individuals belonging to high-risk or sanctioned regions possess more chances of bypassing identity authentication and using illicit funds, de-tracking shipments, or vanishing during payments. As a result, trading companies will be left with huge financial losses.

Further challenges faced by exchange firms include the following:

Insider Trading

Employees disclose confidential information to competitors or use it for personal benefits such as goods, stocks, and securities exchange. This process is commonly known as insider trading in the competitive market and is illegal in the majority of countries. 

Moreover, companies a part of insider trading can face severe legal repercussions and millions of dollars in fines. This makes integration of identity verification services crucial for exchange companies as they help identify this malicious scheme. 

Ongoing monitoring and multifactor authentication before accessing confidential records help save trading companies from exploitation. Furthermore, biometric identity verification systems hinder criminal attempts by asking for real-time selfies and analyzing facial features. 

Competitive Market Manipulation

Criminals use malicious strategies to exploit trading trends that directly affect stock prices. These market manipulation techniques include:

  • Wash Trading

This technique refers to synthetic identity fraud for re-selling stocks to oneself. Fraudsters do this to show interest in trading and in prominent market trends. They often include a third party in dealings to authenticate their intentions further. 

  • Spoofing Attacks or Layering 

Criminals make false impressions of certain products’ demands by creating a hidden scenario through fake orders placing. They bypass ID verification checks to either include their fellows or create fraudulent identities to place multiple non-genuine bids. 

  • Pump and Dump

This form of fraud involves dodging identity authentication to create fake images of a particular company. Criminals attract investors this way and dump their shares later at inflated prices. 

In order to overcome market manipulation and a fraudulent spike in stocks, trading companies require robust identity verification services. The AI-powered digital onboarding solutions provide suspiciousness detection that helps brokers stay aware of malicious activities. 

Illicit Funds’ Movement 

High-risk investors see the trading industry as their safe haven for concealing their dirty money. They use counterfeit profiles to make their funds look legitimate and deal in hefty-priced goods or services. Furthermore, the rapid exchange is another way to conceal the proceeds of crimes. As a result, the flow of illicit funds attracts regulatory scrutiny along with severe legal fines for trading companies due to their inadequate identity verification checks. 

Brokerage firms should incorporate identity verification services into their exchange processes for identifying criminals. Moreover, they can ensure secure opportunities for potential buyers, sellers, and investors. AI-powered ID verifications solutions offer the following checks for fraud prevention:

  • Validation of Personally Identifiable Information (PII) 
  • Document forgery detection 
  • Real-time customer authentication 
  • Liveness detection for real-time presence assurance
  • Proof of address check
  • Cross-verification across global registers, databases, and watchlists 

End Notes

Trading companies are falling victim to criminal threats such as synthetic identity fraud, illicit account takeovers, and much more. Considering their tremendous growth, fraudsters are taking their fair share out through malicious exchanges or payment scams. Hence, integrating identity verification solutions will help brokers need to deter their attempts. As a result, they can build secure digital onboarding systems with more security and increased workflow. AI-powered ID verification solutions are sure ways for trading companies to accelerate revenue generation and overall uplift growth.