Cryptocurrencies are a revolutionary technology that gained momentum in the recent past. However, to mitigate their risks, the use of facial recognition is becoming ever more necessary.
Crypto reached global fame among investors and consumers within a decade of its foundation. In 2009, “Bitcoin” – the first cryptocurrency was created which now has a market capitalisation of $64 billion (as of January 2019).
Cryptocurrencies are one of the most effective advancements in the field of Fintech (financial technology). They have assisted many people in the secure transfer of funds but have also opened opportunities for many criminal activities like terrorist funding and money laundering.
This technology is exploited by criminal entities in the execution of planned financial crimes.
The features of cryptocurrencies
Cryptocurrencies are decentralised digital currencies, which means they are not controlled by any regulatory authority. This makes crypto transfers fast and easy for people. Due to the lack of regulatory obligations, cryptocurrencies often don’t perform in-depth security measures on small fund transfers and similar services.
Merchants that live in high-risk countries are using them to conduct business with other countries. Transfer of fiat requires a hefty process and often banks do not cater to the customers from high-risk countries until and unless an intermediary is involved to guarantee the payment from those clients.
Money laundering and terrorist financing
Bitcoin.com news revealed that $3.6 billion worth of cryptocurrencies have been stolen in the first two months of 2018. Crypto transfers are being closely monitored but there have been incidents in the recent past when huge money laundering scandals related to cryptocurrency have surfaced. The trail of crypto transfers becomes tainted once it involves more countries and with quite different regulatory infrastructures.
For example, 12 individuals from Russia allegedly used cryptocurrencies (Bitcoin) to launder money to the US for their involvement in the 2016 US presidential elections. These individuals bought domains and IT infrastructure to transfer funds to the US in a way such that financial regulators could not trace them back.
Use of fake identities
Fake identities are used for financial crime committed on crypto platforms. Criminals use stolen or fake identities to stay anonymous while conducting crime and cryptocurrency platforms are unable to trace them.
Other crimes committed on crypto platforms involve credit card fraud, account takeover fraud, etc.
How to reduce these frauds?
Cryptocurrencies are thriving in the digital era and proactive fraud prevention is inevitable. The cryptocurrency facilitators need to perform identity verification on their customers to mitigate the risk. It ensures transparency in the fund transfer and increased growth by onboarding legitimate customers.
On the other hand, customer due diligence is also the regulatory obligation of cryptocurrency businesses. The regulatory authorities such as FATF (Financial Action Task Force), FINTRAC, FinCEN and the EU regulatory authority require crypto businesses to perform identity verification on their customers before onboarding them.
So it is clear that customer due diligence is the key to reduce planned crimes on crypto platforms. And what better way would be to handle this crime than with equally capable technology such as face recognition.
How does face recognition work?
Face recognition technology is using artificial intelligence and machine learning for verifying customers in real-time. Face Recognition Technology detects the face and collects the unique facial features of the person to generate an algorithm which then looks for matches within the databases.
It also uses liveness detection and 3D depth perception technology to identify spoof attacks such as paper backed images and photoshopped images.
Using this technology will help the crypto businesses in performing real-time and swift verification. It verifies customers in real-time and delivers high-quality results within seconds. It reduces false positives and helps crypto platforms onboard secure clientele.
In summary, crypto businesses are expected to experience tremendous growth in the coming years and fraudsters are all set to use this technology to commit planned crimes. Crypto platforms need to understand this threat and take proactive measures to mitigate fraud attempts.
Facial recognition could prove to be the best suitable technology for this purpose as it is cost-effective, hassle free and delivers highly accurate results in real-time. In other words, technology is the solution to mitigate evolving frauds in 2020.