Technology storms the security setup of financial firms. The rising graph of financial frauds for illicit gains is highly alarming. Fraudsters use financial accounts and other details of digital business and monetary institutions to turn black money into white. In every business sector, it is essential to know who is dealing with before, further extending the ties. Various companies sign the deal with investors without investor authentication and later end in a scam. That’s why there is a pressing need for an Online Investor Verification system.
It requires knowing all the details about the investor, source of income and identity verification etc. It aids in controlling possible scams. Regulatory bodies are operational in making laws and procedures for the investor onboarding in true spirit. Despite efforts in this line, investment scams continue to prevail across the globe. There is a brief overview of KYI (Know Your Investor) and global investment frauds.
Significance of KYI (Know Your Investor)
The tech-driven firms allow investment expansion for large revenue generation. The investment market is striving to remain compliant with investment rules and procedures. Additionally, the growing investment market faces challenges because of inefficient online investor verification systems. Allowing investors for investment without knowing the complete record, including means of income, assets source and personal authentication etc. doubles the risk of fraud on a massive scale. The online investor verification process is required to scale down the threat risk proportion.
Global Financial Institutions and Investment Frauds
The world has become a global village, and all the financial institutions, whether financial or non-financial, are well integrated. Global regulatory authorities play an objective role in protecting the financial sector from criminal actions. The largest and most important financial institutions, including International Monetary Fund (IMF), World Bank (WB) and International Finance Corporation (IFC) etc., have to diligently manage the asset profiles of the investors to secure the investment sector all over the world. The World Bank regulates laws for investors and employees to ensure investor authentication to mitigate chances of scams. Furthermore, it unveils fraudsters often claimed as bank auditors or members of the Bank West African Regional Delegation.
1. Identification of Russian Investors
Russian oligarchs and US residents found themselves involved in financial frauds and money accumulation in various financial sectors around the world. This is alarming for the global economy.
According to the New York Times, Russian oligarch, Roman Abramovich, found investing billions of dollars in shell companies and the Cayman Islands($20 Million investment). The oligarch also remained involved in secret money transfers and financial setups. This is how weak accredited investor verification impacts the investment market.
2. Ukrainian Fake Investment Revelation
Ukrainian investors are also alleged for investment scams. Guardian reveals Ukrainian traders are involved in investment fraud and as per an estimate $70 Million in fake investment was made last year. Ukrainian financial companies are also found guilty of fraudulent investments.
The strategy of the criminal is to start with small investments. Once trust is build-up, a large amount of investments is made to gain illegal objectives. The investor verification online procedure is required to strengthen and protect the investment setup.
Potential Benefits for Accredited Investors
There are several advantages for accredited investors passed through the accredited investor verification process, including wide access to sensitive investments, restricted investments, maximum conversions, high diversification in the desired sectors, high market confidence, and large scale yield etc.
Such investors’ credibility is higher than non-accredited investors and similar is the case with capital fund opportunities. According to Bloomberg Law, SEC accredited investors are offered with the best investment opportunities in the US.
The online investor verification system authenticates all the investors for smooth investments. Furthermore, it helps to reduce the prospects of money laundering around the globe. KYC Verification service is also used for this purpose.
FATF Regulations for Investors
FATF (Financial Action Task Force) recommendations for financial investors demand full compliance. To ensure compliance and reduction in investment fraud risk, FATF shares the key guidelines.
Without an effective online investor verification service, it is difficult to detect money laundering and terror financing activities. FATF verifies the tax record, income source and other legal credentials of investors to trace their unethical or fraudulent attempts. It also takes strict actions against unverified investors’ profiles to stop illegitimate actions.
To win the trust of customers, identity verification is the first step toward a secure and effective online investor verification process. It is mandatory to create awareness about the significance of digital agreements and online investor verification trends to ensure the compliance mechanism.
The ease-to-do-business environment purely customer-centric and profit-driven is highly productive for both small and large-scale businesses. Seamless investment is not only a positive sign for the financial market but also for the whole economic system of the world.
Shufti Pro takes the lead in realizing the need for an Online Investor Verification system incorporated into every business to stop financial irregularities and scams.