<h2>What is FICA Express?&nbsp;</h2>FICA Express is a one-click solution for basic FICA Compliance. Billed at a market-leading fixed rate of R9.95 per check, FICA Express generates a comprehensive PDF report that empowers businesses to quickly and easily vet customers and ensure compliance with FICA.&nbsp;FICA Express Allows You To: &nbsp;	•	Verify a South African ID Number &nbsp;	•	Check for PEP, DPIP and FPPO Status &nbsp;	•	Screen Sanctions and Watchlists &nbsp;	•	Conduct Adverse Media Screening &nbsp;	•	Run AML Screening&nbsp;All of this information can be checked by using only an individual’s South African ID number, empowering your business to easily verify customers and ensure compliance with FICA. &nbsp;<h2>Who is FICA Express For? &nbsp;</h2>FICA Express is for anyone who needs to quickly and easily meet the basic requirements for FICA Compliance.&nbsp;However, cost and efficiency of the service is especially useful for: &nbsp;	•	Motor Vehicle Dealers &nbsp;	•	High-Value Goods Dealers&nbsp;<h2>Save Over 45% off with our Referral Promotion &nbsp;</h2>We are running a referral program that gives you the chance to save over 45% on your FICA Express bill up until the 30th of September 2024. &nbsp;For every new client you successfully refer to us (up to a maximum of 3) we will give you a discount on all your FICA Express usage bills, up until the 30th September 2024. &nbsp;How Does it Work?&nbsp;<ol><li>Sign up for FICA Express with ThisIsMe.&nbsp;</li><li>Send your custom referral link to other businesses and get them to sign up for ThisIsMe’s FICA Express solution.&nbsp;</li><li>For each customer that you refer and successfully signs up with ThisIsMe, you get a percentage discount in the following tiers: &nbsp;</li></ol>1x Referral: 5% Discount &nbsp; 2x Referrals: 10% Discount &nbsp; 3x Referrals: 49% Discount  &nbsp;This promotion is valid from the 1st of June until the 30th of September and normal billing rates will apply from the 1st of August 2024 onwards.&nbsp;<h2>How Much Does FICA Express Cost?&nbsp;</h2>FICA Express costs R9.95 per use.Our Partners Platform (the platform from which you will access and use FICA Express) has a minimum monthly spend of R495 per month. In other words, you can verify 50 customers a month for R495. &nbsp;For every additional customer you verify above 50, you will only pay 9.95 extra per customer. &nbsp;<h2>How to Sign Up with FICA Express&nbsp;</h2>During our promotion period, there will be no setup fee for FICA Express. This means that you can sign up as a ThisIsMe client and begin using FICA Express immediately for no extra charge.&nbsp;This promotion runs until the 30th of September 2024. &nbsp;For all our existing customers, FICA Express is available on our Partners Platform. All our existing clients can run FICA Express checks. The service is located in the header bar at the top of our Partners Platform, enabling easy access at any time.&nbsp;<h2>Request a Demo Today &nbsp;</h2>To see how FICA Express can empower your business to easily comply with FICA, simply request a demo <a href="https://thisisme.com/?refId=Magazine#Demo-Form" target="_blank">here. &nbsp;</a>

Explore FICA Express, the new market-leading product from ThisIsMe. Verify a South African ID number and screen for Sanctions and PEP, DPIP and FPPO status, all in one service.

FICA Express - New Service Launch

<h2>Which Industries Remain Uncompliant?</h2>Industries like financial services (including retail banking, insurance and payment companies) have for years been obligated to verify identities and conduct AML risk screening.&nbsp;However, there are many newly-regulated industries in South Africa that remain largely uncompliant with FICA. A lack of knowledge concerning FICA compliance means that they have not yet become compliant, or remain entirely unaware of their FICA compliance obligations.&nbsp;Some Uncompliant Industries&nbsp;As noted by the FIC, the following indutries maintain low levels of FICA compliance.&nbsp;	•	Legal Practitioners: 60% &nbsp;	•	Estate Agents: 66%&nbsp;	•	Trust Service Providers: 74% &nbsp;	•	Company Service Providers: 76% &nbsp;One newly regulated “industry” is that of High-Value Goods Dealers (HVGDs). According to the Financial Intelligence Centre (FIC), HVGDs include any business dealing in goods with a selling price of over R100,000. The FIC has listed HVGDs as Accountable Institutions due to the high risk of their assets being used by criminals to launder money.&nbsp;&nbsp;Examples of High-Value Goods Dealers:&nbsp;<ul><li>Bicycle dealers&nbsp;</li><li>User motor vehicle dealers&nbsp;</li><li>Agricultural equipment dealers&nbsp;</li><li>Heavy equipment dealers</li><li>Motorcycle dealers&nbsp;</li></ul><h2>What are the FIC’s Requirements?</h2>Many of these industries are classified as High-Value Goods Dealers (HVGDs). &nbsp;In general, this means that they sell single items for R100,000 or more. In such an instance, the business selling the item must:&nbsp;<ul><li>Verify the client’s ID number&nbsp;</li><li>Conduct AML Risk Screening (incl. checking for PEP/DPIP/FPPO status, screening for the individual’s presence on sanctions and watchlists, and checking for adverse media).&nbsp;</li></ul>These checks must be implemented in accordance with a company’s Risk Management and Compliance Programme (RMCP).&nbsp;<h2>What is an RMCP and RCR?&nbsp;</h2>An RMCP is a legal document that identifies the risks a business may encounter and outlines the strategies and measures implemented to mitigate those risks. For instance, if a business is at high risk of criminal activity, such as clients using false identities to launder money, it must adopt a risk assessment and identity verification system to ensure the legitimacy of its clients. These risks, along with the corresponding mitigation steps, are thoroughly detailed in the RMCP.Creating an RMCP is a specialized task best handled by a law firm or professional with expertise in regulatory compliance. While free RMCP templates are available online, relying on them is not recommended, as many fail to meet the Financial Intelligence Centre's (FIC) audit standards. A failed audit can result in fines and other legal consequences.Additionally, businesses are required to complete a Risk and Compliance Return (RCR), an online form provided by the FIC. By submitting the RCR, your company demonstrates awareness of money laundering risks and confirms adherence to the measures outlined in its RMCP.The RCR can easily be filled out and submitted online via the FIC’s website <a href="https://www.fic.gov.za/2023/11/02/rcr/" target="_blank">here</a>.&nbsp;<h2>FICA Compliance Solutions&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. We provide a wide range of due diligence services that can help industries new to FICA easily ensure their regulatory compliance.&nbsp;To experience our full suite of advanced due diligence services, simply request a demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

Many newly-regulated industries in South Africa remain uncompliant with FICA. As 2024 draws to a close, non-compliant companies are advised to become compliant in order to avoid fines.

FICA Compliance Catching Newly Regulated Industries Off-Guard

<h2>What is DHA Downtime?&nbsp;</h2>Familiar to all South Africans, the Department of Home Affairs (DHA) is South Africa’s governmental department in charge of the nation’s civil registry, identity and passport documents, immigration, and more.&nbsp;The DHA oversees South Africa’s Home Affairs National Identification System (HANIS), a database of all South African citizens’ personal identity information. This includes identity numbers, vital status, photos, marriage status, etc. All “real-time” identity verification services in South Africa reference HANIS in order to verify an individual’s identity.&nbsp;However, HANIS has proven unreliable and is prone to “downtime”. In short, DHA downtime is when the DHA’s HANIS servers fail and go offline. For this period, any ID verification services that pull data from the DHA in real-time cannot function. This can disrupt the workflows of businesses and institutions by making it impossible to verify customer ID numbers.&nbsp;However, higher-end ID verification service providers offer services that can function perfectly, even during DHA downtime.&nbsp;<h2>How can you protect against DHA downtime?&nbsp;</h2>As a business, the only way to protect against DHA downtime is to partner with a provider of ID verification service provider that offers services that can function when the DHA is offline.&nbsp;These services are commonly known as “offline services” or “automatic failover services”. They work by using cached identity information to verify identities, even when the DHA is offline.&nbsp;These services are so valuable because they enable businesses to continue operating like normal, even during extended periods of DHA downtime. This capacity saves businesses time and money and empowers them to deliver a consistently high-quality customer experience that is not disrupted by DAH downtime.&nbsp;<h2>ID Verification Services for DHA Downtime</h2>ThisIsMe offers two high-quality DHA offline services that enable your business to defeat DHA downtime:&nbsp;<ul><li>ID Check AlwaysOn: ID Check AlwaysOn is an automatic failover ID verification service that guarantees an uninterrupted ID verification solution, even in the event of the DHA downtime. When the DHA is functioning normally, the service performs real-time identity verification using data pulled directly from the DHA’s HANIS database. In the event of DHA downtime, the service automatically switches over and begins verifying identities by cross-referencing ID numbers against cached data. Real-time verifications resume the moment the DHA comes back online. This seamless transition ensures that identity checks are always completed, even in the face of system disruptions.</li><li>ID Check On File: ID Check OnFile is a non-real-time ONLY service designed as a backup identity verification service for when the DHA is offline – it will never pull real-time data from the DHA’s HANIS database. The service functions by cross-referencing a South African ID number against hosted credit bureaux data to verify an individual’s identity, ensuring that ID verifications can always be accurately completed.&nbsp;</li></ul>To request a demo and see our DHA offline services in action, simply email sales@thisisme.com or click <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

Understand what DHA downtime is and how ThisIsMe's range of DHA offline services empower your business to verify identities, even during DHA downtime.

What is DHA Downtime?

In South Africa, real estate agents (legally defined as property practitioners) are now listed as accountable institutions under the Directive 6 of the Financial Intelligence Centre Amendment Act (FICA).&nbsp; In short, this means that estate agents are now legally obligated to comply with certain regulations governing anti-money laundering laws in South Africa. This typically means verifying customer identities via their ID number, screening for PEP, DPIP, FPPO and sanction status, and verifying physical address information.<h2>What is the FIC and an RBA?&nbsp;</h2>South Africa operates a Risk-Based Approach to anti-money laundering (AML) legislation. In short, this means that each business must take steps to mitigate money laundering that are proportionate to the risks it faces.&nbsp;For example, a multinational bank will face far greater risks of money laundering than a small real estate agency. Because the bank faces way higher risks, it will be legally required to implement stricter and more complex systems to mitigate these risks. A small real estate firm, on the other hand, may only be required to implement basic forms of risk mitigation like ID number verification.&nbsp;South Africa’s anti-money laundering legislation and its RBA are created and implemented by the Financial Intelligence Centre (FIC).&nbsp;<blockquote>“The FIC is South Africa’s financial intelligence unit, mandated to assist in identifying the proceeds of crime, and in combating money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction, thereby helping to make South Africa’s financial system intolerant to abuse.” – Financial Intelligence Centre.</blockquote><h2>What is the Difference Between an RMCP and an RCR?&nbsp;</h2>In this context, a Risk Management and Compliance Program (RMCP) is the legal document that identifies what risks a business faces and outlines the steps that it is taking to mitigate these risks. For example, if a business faces a risk of criminal clients using fraudulent identities to launder money, then that business will be required to implement an identity verification system to ensure that its clients are legitimate. All these risks and the steps taken to mitigate them are detailed within a business’s RMCP.&nbsp;An RMCP is a complex document and should be created by a law firm or individual who specialises in regulatory compliance. Although free RMCP templates are available online, it is advisable to avoid these because many of them fail upon audit by the FIC. Having your RMCP fail upon audit may lead to fines and legal other penalties.&nbsp;Finally, a Risk and Compliance Return (RCR) is an online form created by the FIC. By filling it out, your company demonstrates that it understands money laundering risks and is acting in accordance with its Risk Management and Compliance Program (RMCP).&nbsp;<h2>How to Submit Your RCR to the FIC&nbsp;</h2>The RCR can easily be filled out and submitted online via the FIC’s website here.&nbsp;Note that real estate agents must fill out the RCR for Directive 6 (not Directive 7).&nbsp;The deadline for RCR submission has already passed. The deadline for Directive 6 was the 31st of May 2024, which was already a year-long extension of the original date of the 31st of May 2023.&nbsp;Real estate agents are advised to urgently submit their RCR and implement the necessary due diligence laws to avoid serious fines and legal penalties.&nbsp;<h2>What are the Penalties for Non-Compliance with FICA&nbsp;</h2>The fines for FICA non-compliance are massive. The FIC is allowed to issue a wide range of fines to both individuals and legal entities, which can be as high as:&nbsp;<ul><li>R10 million for individuals (CEOs and compliance officers)</li><li>R50 million for legal entities (e.g., businesses and trusts)</li></ul>The FIC and South Africa’s market conduct enforcement body, the Financial Sector Conduct Authority (FSCA), are clamping down on non-compliant businesses and have begun issuing fines.&nbsp;In September 2024, a South African law firm issued a R7.7 million fine as punishment for its failure to comply with FICA. Such fines are likely to become more commonplace as the FSCA works to close the non-compliance gap.&nbsp;<h2>FICA Compliance Solutions for Real Estate Agents in South Africa&nbsp;</h2>ThisIsMe offers a comprehensive range of products and services that are perfectly designed to help your business meet its FICA compliance obligations.&nbsp;The following three services are perfect for real estate agents to ensure FICA compliance: &nbsp;<ul><li>ID Check: Verify a South African ID number and get essential information for FICA compliance.&nbsp;</li><li>AML Risk Screening: Screen an individual for PEP, DPIP and FPPO status, their presence on international watchlist and sanctions databases, and more.&nbsp;</li><li>FICA Express: Our leading new service combines an ID check and AML Risk Screening into a one-click service that perfectly meets your FICA compliance needs.&nbsp;</li></ul>ThisIsMe offers a comprehensive range of products and services also includes a wide range of general due diligence and risk assessment tools that are loved by our real estate clients. These include:&nbsp;<ul><li>Affordability: Submit a client’s bank statements and get a detailed financial wellness assessment that returns detailed insights of monthly income and expenditure patterns. Estate agents love this service for assessing a client’s viability for financial services like home loans.&nbsp;</li><li>Credit Reports: Our comprehensive and varied range of credit information services empowers you to easily source all credit information, ranging from simple credit score checks to full-blown credit reports.</li><li>VAT Search: Easily source a business’s VAT number for tax purposes.</li></ul>To experience our software in action and see how it can address your business’s FICA compliance challenges, simply email sales@thisisme.com or schedule a demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

Easily become fully FICA compliant when you partner with ThisIsMe. Understand your obligations concerning RMCP and RCR submission and the systems you need to implement to ensure FICA compliance.

FICA Compliance Requirements for Real Estate Agents in South Africa

In South Africa, law firms are now listed as accountable institutions under the Directive 6 of the Financial Intelligence Centre Amendment Act (FICA). In short, this means that law firms are now legally obligated to comply with certain regulations governing anti-money laundering laws in South Africa. This typically means verifying customer identities via their ID number, screening for PEP, DPIP, FPPO and sanction status, and verifying physical address information.<h2>What is the FIC and an RBA?</h2>South Africa operates a Risk-Based Approach to anti-money laundering (AML) legislation. In short, this means that each business must take steps to mitigate money laundering that are proportionate to the risks it faces.For example, a multinational bank will face far greater risks of money laundering than a small law firm. Because the bank faces way higher risks, it will be legally required to implement stricter and more complex systems to mitigate these risks. A small law firm, on the other hand, may only be required to implement basic forms of risk mitigation like ID number verification.South Africa’s anti-money laundering legislation and its RBA are created and implemented by the Financial Intelligence Centre (FIC).<blockquote>“The FIC is South Africa’s financial intelligence unit, mandated to assist in identifying the proceeds of crime, and in combating money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction, thereby helping to make South Africa’s financial system intolerant to abuse.” – Financial Intelligence Centre.</blockquote><h2>What is the Difference Between an RMCP and an RCR?</h2>In this context, a Risk Management and Compliance Program (RMCP) is the legal document that identifies what risks a business faces and outlines the steps that it is taking to mitigate these risks. For example, if a business faces a risk of criminal clients using fraudulent identities to launder money, then that business will be required to implement an identity verification system to ensure that its clients are legitimate. All these risks and the steps taken to mitigate them are detailed within a business’s RMCP.An RMCP is a complex document and should be created by a law firm or individual who specialises in regulatory compliance. Although free RMCP templates are available online, it is advisable to avoid these because many of them fail upon audit by the FIC. Having your RMCP fail upon audit may lead to fines and legal other penalties.Finally, a Risk and Compliance Return (RCR) is an online form created by the FIC. By filling it out, your company demonstrates that it understands money laundering risks and is acting in accordance with its Risk Management and Compliance Program (RMCP).<h2>How to Submit Your RCR to the FIC</h2>The RCR can easily be filled out and submitted online via the FIC’s website <a href="https://www.fic.gov.za/2023/11/02/rcr/" target="_blank">here</a>.Note that law firms must fill out the RCR for Directive 6 (not Directive 7).The deadline for RCR submission has already passed. The deadline for Directive 6 was the 31st of May 2024, which was already a year-long extension of the original date of the 31st of May 2023.Law firms are advised to urgently submit their RCR and implement the necessary due diligence laws to avoid serious fines and legal penalties.<h2>What are the Penalties for Non-Compliance with FICA</h2>The fines for FICA non-compliance are massive. The FIC is allowed to issue a wide range of fines to both individuals and legal entities, which can be as high as:<ul><li>R10 million for individuals (CEOs and compliance officers)</li><li>R50 million for legal entities (e.g., businesses and trusts)</li></ul>The FIC and South Africa’s market conduct enforcement body, the Financial Sector Conduct Authority (FSCA), are clamping down on non-compliant businesses and have begun issuing fines.In September 2024, a South African law firm issued a R7.7 million fine as punishment for its failure to comply with FICA. Such fines are likely to become more commonplace as the FSCA works to close the non-compliance gap.&nbsp;<h2>FICA Compliance Solutions for Law Firms in South Africa</h2>ThisIsMe offers a comprehensive range of products and services that are perfectly designed to help your business meet its FICA compliance obligations.The following three services are perfect for real estate agents and law firms:&nbsp;<ul><li>ID Check: Verify a South African ID number and get essential information for FICA compliance.</li><li>AML Risk Screening: Screen an individual for PEP, DPIP and FPPO status, their presence on international watchlist and sanctions databases, and more.</li><li>FICA Express: Our leading new service combines an ID check and AML Risk Screening into a one-click service that perfectly meets your FICA compliance needs.</li></ul>ThisIsMe offers a comprehensive range of products and services also includes a wide range of general due diligence and risk assessment tools that are loved by our legal clients. These include:<ul><li>Affordability: Submit a client’s bank statements and get a detailed financial wellness assessment that returns detailed insights of monthly income and expenditure patterns. Law firms love this service for assessing whether a potential client can afford their legal services.</li><li>Credit Reports: Our comprehensive and varied range of credit information services empowers you to easily source all credit information, ranging from simple credit score checks to full-blown credit reports.</li><li>VAT Search: Easily source a business’s VAT number for tax purposes.</li></ul>To experience our software in action and see how it can address your business’s FICA compliance challenges, simply email sales@thisisme.com or schedule a demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Becoming compliant with FICA is easy with the right partners. Read our informative guide to understand the legislation governing anti-money laundering compliance and the systems desisnged to mitigate it.

FICA Compliance Requirements for Law Firms in South Africa

For South Africa, 2024 is proving to be the year of AML compliance fines. As the deadlines for compliance with FICA have come and gone, the FIC is beginning to hand down fines to companies that remain uncompliant <a href="https://thisisme.com/insights/FICA-Clampdown-Begins-R7.7-Million-Fine-Issued-to-Non-Compliant-Law-Firm" target="_blank">(read more)</a>. As this process begins, how does South Africa’s AML compliance fines compare other fines across the world?<h2>Largest AML Fines in 2024</h2>1. &nbsp; &nbsp; MGM Grand &amp; The Cosmopolitan - $7.45 million settlementTwo of the largest casinos in Las Vegas – the MGM Grand and The Cosmopolitan – will pay a combined fine of $7.45 (R130 million) as punishment for violating key AML laws relating to illicit sports betting&nbsp;schemes.&nbsp;2. &nbsp; &nbsp; Estate Agents - $2.1 million fineIn the United Kingdom, 245 different estate agents will pay AML compliance fines that combined total over $2.1 million (R37 million). These fines for hundreds of non-compliant estate agents demonstrates what lies ahead for South African real estate agents, who still have one of the lowest rates of FICA compliance in South Africa and are coming under increasing scrutiny from the FIC.3. &nbsp; &nbsp; Commerzbank - $1.5 million fineThe German retail bank Commerzbank was fined $1.5 million (R26.3 million) as punishment for violating its AML compliance obligations and failing to ensure that its AML systems and procedures met regulatory standards.<h2>Largest AML Fines Ever – Over Four Billion Dollars?</h2>1. &nbsp; &nbsp; Binance – $4.3 BillionThe world’s largest cryptocurrency exchange was slapped with a $4.3 million fine for repeated violations and international and US federal AML laws. Binance’s scandal included the company’s facilitation of suspicious transactions for terrorist organizations like al-Queda and ISIS.In the official court filing of United States vs Binance, one charge alleged that a compliance employee for Binance wrote:&nbsp;<blockquote>“We need a banner ‘is washing drug money too hard these days? Come to Binance, we have cake for you.’”</blockquote>For more crazy facts about Binance’s AML scandal, read our full coverage article <a href="https://thisisme.com/insights/How-Binance-Facilitated-Transactions-for-Al-Qaeda-The-Failures-of-AML-CFT" target="_blank">here</a>.2. &nbsp; &nbsp; Standard Chartered – $1.1 BillionIn 2019, the British multinational bank, Standard Chartered, was fined over $1 billion as punishment for the processing transactions for dozens of sanctioned companies and territories, including Iran, Cuba and Syria.3. &nbsp; &nbsp; Deutsche Bank – $630 MillionThe German multinational bank, Deutsche Bank, was slapped with $630 million fine for its failure to meet AML compliance obligations, specifically for accepting funds from Russian clients that had associations with money laundering rings.<h2>AML Penalties in South Africa – How Do FICA Compliance Fines Compare?</h2>It has now been several months since the deadlines for Directive 6 and Directive 7 have passed. the bestA South African law firm was recently fined R7.7 million as punishment for its failure to comply with FICA. The firm was also fined an additional R50,000 for failing to submit its RCR.The fines for FICA non-compliance are massive. The FIC is allowed to issue a wide range of fines to both individuals and legal entities, which can be as high as:<ul><li>R10 million for individuals (CEOs and compliance officers)</li><li>R50 million for legal entities (e.g., businesses and trusts)</li></ul>It is widely expected that the FIC will begin imposing larger and larger fines in order to force widespread FICA across South Africa. The publication of this R7.7 million Rand fine represents the FIC making an example of one such case and is a sign of the thousands of fines that will inevitably be issued if businesses fail to become FICA compliant themselves.When FICA compliance is so easy to achieve, it is not worth putting yourself and your business at risk of fines worth millions of Rands.<h2>AML Screening and FICA Compliance Solutions for South Africa</h2>ThisIsMe offers a comprehensive range of products and services that are perfectly designed to help your business meet its AML and FICA compliance obligations.FICA compliance obligations can be complex and multicateted, but our following three services are perfect for meeting all essential client screening obligations.<ul><li>ID Check: Verify a South African ID number and get essential information for FICA compliance.</li><li>AML Risk Screening: Screen an individual for PEP, DPIP and FPPO status, their presence on international watchlist and sanctions databases, and more.</li><li>FICA Express: Our leading new service combines an ID check and AML Risk Screening into a one-click service that perfectly meets your FICA compliance needs for only R9.95 per customer.</li></ul>To experience our software in action and see how it can address your business’s FICA compliance challenges, simply schedule a demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Around the world, AML fines worth millions of Rands have been handed down to companies that broke their AML compliance obligations - how do these compare to South Africa's AML fines?

Largest AML Fines in 2024 - How Do FICA Fines Compare?

<h2>The Financial Intelligence Centre has begun issuing fines to South African businesses who remain non-compliant with FICA. </h2>As reported by <a href="https://www.news24.com/citypress/business/south-african-law-firm-faces-hefty-compliance-fines-as-sa-battles-to-get-off-grey-list-20240915" target="_blank">News24</a>, the FIC recently issued a R7.7 million fine to an unnamed law firm in South Africa as punishment for its continued non-compliance with FICA.The law firm faced an additional R50,000 fine as punishment for failing to submit its Risk and Compliance Return (RCR).This is far from the only fine that has been issued. The FIC claims to have also issued fines to 202 other businesses that remain uncompliant.The clampdown on FICA non-compliance by the FIC comes as South Africa battles to address serious deficiencies in its Anti-Money Laundering (AML) laws. Addressing these deficiencies by ensuring that businesses across South Africa have the necessary AML systems in place is essential to get South Africa removed from the FATF’s greylist, the effects of which are costing the country’s economy billions of Rands and suppressing growth.<h2>SA’s Widespread Non-Compliance Crisis</h2>Despite the FIC having worked for years to ensure widespread FICA compliance in South Africa, &nbsp;many industries still remain uncompliant months after the key deadlines have passed.The deadline for the submission of the Directive 6 RCR was the 31st of May 2024, while the Directive 7 deadline was July 31st. According to the FIC, the average RCR submission for Directive 6 sits at a disappointing 63%.<ul><li>Legal Practitioners: 60% &nbsp;</li><li>Estate Agents: 66%&nbsp;</li><li>Trust Service Providers: 74% &nbsp;</li><li>Company Service Providers: 76% &nbsp;</li><li>Casinos: 100% &nbsp;</li></ul>Real estate agents and law firms are the least compliant industries in South Africa. At the Tax Indaba held in Cape Town, it emerged that many real estate agents and law firms were largely unconcerned with FICA compliance.This lack of concern is worrying and dangerous. Not only does non-compliance put South Africa at risk of failing to remove itself from the FATF’s greylist, but non-compliant firms are also at risk of being fined millions of Rands.&nbsp;<h2>A Price Too Big to Pay – The Massive Fines for FICA Non-Compliance</h2>The fines for FICA non-compliance are massive. The FIC is allowed to issue a wide range of fines to both individuals and legal entities, which can be as high as:&nbsp;<ul><li>R10 million for individuals (CEOs and compliance officers)</li><li>R50 million for legal entities (e.g., businesses and trusts)</li></ul>It is widely expected that the FIC will begin imposing larger and larger fines in order to force widespread FICA across South Africa. The publication of this R7.7 million Rand fine represents the FIC making an example of one such case and is a sign of the thousands of fines that will inevitably be issued if businesses fail to become FICA compliant themselves.When FICA compliance is so easy to achieve, it is not worth putting yourself and your business at risk of fines worth millions of Rands.<h2>FICA Compliance Services for Real Estate Agents and Law Firms</h2>ThisIsMe offers a comprehensive range of products and services that are perfectly designed to help your business meet its FICA compliance obligations.The following three services are perfect for real estate agents and law firms: &nbsp;<ul><li>ID Check: Verify a South African ID number and get essential information for FICA compliance.</li><li>AML Risk Screening: Screen an individual for PEP, DPIP and FPPO status, their presence on international watchlist and sanctions databases, and more.</li><li>FICA Express: Our leading new service combines an ID check and AML Risk Screening into a one-click service that perfectly meets your FICA compliance needs for only R9.95 per customer.</li></ul>To experience our software in action and see how it can address your business’s FICA compliance challenges, simply schedule a demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

The FIC has issued one of the largest fines yet for FICA non-compliance in South Africa. At R7.7 million, the fine is a sign of things to come as the FIC begins to clamp down and enforce FICA compliance across South Africa.

FICA Clampdown Begins - R7.7 Million Fine Issued to Non-Compliant Law Firm

<h2>A Decade of Experience – Taking Stock and Looking Forwards&nbsp;</h2>ThisIsMe turns 10 years old this month. We are celebrating this special milestone by launching our new Partners Platform, codenamed Project Odin. Project Odin brings a vast array of upgrades over our legacy platform, as well as several new services, and will serve as the solid foundation for many of the exciting projects we have under development. &nbsp;Now with over a decade of growth and experience under our belts, I look back on how our company has changed, the evolving landscape of our industry, and how we are committed to once again revolutionise our industry.&nbsp;<h2>Faced with a Problem, We Chose to be Agile &nbsp;</h2>We originally conceptualized ThisIsMe in 2013 as a way for verified identities to promote authentic transactional security.&nbsp;The goal was to empower individuals with the capacity to verify their own identities using our services, earning them a stamp of approval, that they could then present to relevant financial institutions to become FICA compliant. &nbsp;Although our idea generated massive interest, the market at the time did not make this model commercially viable. Facing this challenge, we made the call to reimagine ThisIsMe as a B2B service provider, wherein we would provide identity verification services to institutions to use in their due diligence workflows. &nbsp;Taking a leap of faith, we committed ourselves to this new vision and transformed our business model. The risk paid off. This B2B model flourished and has led to years of service excellence and market-leading service provision to a range of industries and some of the largest financial institutions in South Africa.&nbsp;Although it was a major adjustment, the experience taught us the value of ensuring constant flexibility in order to adjust to unexpected challenges and meet the demands of the industry. &nbsp;Over the last decade, we have maintained this commitment to flexibility and agility. When at times our industry has become inflexible and slow, we have always maintained the capacity to develop innovative solutions to unexpected and complex problems. &nbsp;<h2>What it Means to Set an Industry Benchmark&nbsp;</h2>Our commitment to agility empowered us to make an incredible achievement. &nbsp;In 2017, ThisIsMe transformed the South African FinTech and RegTech industry by setting the benchmark for FICA verification. &nbsp;Although FICA compliance today is a digital and seamless affair, before 2017 it was an arduous process that demanded customers stand in long queues with hardcopy documents in order to become verified. &nbsp;We committed ourselves to slashing this excessive time, and we succeeded: our services cut the time for digital FICA compliance from over three minutes down to only a few seconds.&nbsp;This achievement won the company international acclaim, winning us the prestigious Best African FinTech award and getting us featured on the global RegTech100 list, among a host of other prizes. &nbsp;The following years saw us consolidate our industry presence by greatly expanding our service offering and refining our system architecture. We launched dozens of new services, delivering on our promise of being South Africa’s most complete offering of KYC/AML and digital onboarding tools. &nbsp;<h2>The Challenge of Today &nbsp;</h2>But the landscape of our industry has changed. While the digitalization of FICA compliance has been achieved, the new challenge facing our industry is more personal: helping newly regulated industries to become FICA compliant for the first time ever. &nbsp;The challenge is significant: tens of thousands of businesses must now comply with stringent FICA compliance requirements. Many of these businesses have never faced such compliance challenges before and are unfamiliar with how to navigate the complex challenge of customer due diligence and regulatory compliance. &nbsp;In light of these new challenges, a new benchmark for industry excellence is accessibility.&nbsp;Accessibility means offering easily usable products to businesses that do not have the luxury of an entire compliance department. Developing accessible and easy-to-use services, like our newly launched FICA Express service, represents us delivering on that promise. &nbsp;But accessibility also means providing the knowledge and guidance to help newly regulated industries understand how to overcome their challenges. It means providing free guides, articles and resources that will make it easy for a small business to understand the problems it faces and how to overcome them. It means caring and uplifting customer service that will make businesses feel welcome and cared for in an industry they have never before engaged with. &nbsp;<h2>Our Path Forward, Together with You &nbsp;</h2>Recognizing the changing landscape of our industry, we are investing in setting an industry benchmark through accessibility. &nbsp;Our commitment to accessibility will see us further expand our service offering with more high-quality and accessible services that are designed from the ground up to create the perfect comprehensive solutions for our clients.&nbsp;Our commitment to accessibility also means delivering the best possible customer experience in our industry – for both our new and existing clients. &nbsp;<blockquote>"We are developing not only South Africa's most comprehensive ecosystem of identity verification products available, but also investing in client experience. Our commitment to innovation allows us to constantly expand our range of solutions and meet every need, while our client support ensures an unbeatable business partnership."&nbsp; Juan Furmie | Chief Executive Officer&nbsp;</blockquote>Now with a decade of experience secured, we are entering a new and exciting chapter of our company’s history. We are grateful for our past, honoured by our current position, and excited for the future.&nbsp;Partner with us as we reshape South Africa’s anti-financial crime landscape.&nbsp;Juan Furmie | Chief Executive Officer of ThisIsMe&nbsp;

ThisIsMe has officially turned 10 years old. Having launched ThisIsMe over a decade ago, I take stock of our immense progress and reflect on how the lessons learned will inform our future decisions and pathsways.

ThisIsMe`s 10th Birthday – How a Decade of Experience Shapes our Path Forward

<h2>Project Odin – Our New Partners Platform&nbsp;</h2><div>Codenamed project Odin, our new Partners Platform has been in development for months and brings together many exciting projects. &nbsp;</div><div> </div><div>Odin features extensive improvements to every aspect of the user experience – menu layout, graphic design, technical stability and cross-platform functionality. &nbsp;</div><div> </div><div>Odin is replacing our old Partners Platform and will serve as the stable foundation for all our new services and features going forward. &nbsp;</div><div> </div><div>We are proud to launch our new Partners Platform and share all of the exciting new improvements and services that are now available for use. &nbsp;</div><div>&nbsp;</div><h2>New Services Available&nbsp;</h2><div>Odin is launching with four brand-new services! These are:&nbsp;</div><div>&nbsp;</div><div>FICA Express &nbsp;</div><div>FICA Express is a one-click solution for basic FICA Compliance that verifies customer identity and conducts AML Risk Screening all in one service. Billed at a market-leading fixed rate of R9.25 per check, FICA Express generates a comprehensive PDF report that empowers businesses to quickly and easily vet customers and ensure compliance with FICA. Read more about FICA Express here. &nbsp;</div><div> </div><div>Affordability&nbsp;</div><div>Affordability calculates key metrics such as average income, expenses, and income trends and offers clear insights into an individual's financial health to assess affordability for financial services.&nbsp;</div><div> </div><div>VAT Search&nbsp;</div><div>VAT Search gets SARS VAT information using a VAT number OR trading name. The service provides accurate and up-to-date tax details for verification purposes.&nbsp;</div><div> </div><div>FICA Match&nbsp;</div><div>Get robust ID verification, physical address matching, employment history and email addresses, and an associated matching confidence indicator in the KYC result. The KYC result within FICA Match displays all associated sources of information and provides a matching confidence indicator based on the number of trusted sources affirming the returned information.</div><div> </div><h2>Enhanced User Experience&nbsp;</h2><div>We have made several improvements to our new Partners Platform to improve user experience and daily usability. &nbsp;</div><div> </div><ul><li>Search Function: An integrated search function allows you to easily find the exact service you are looking for, every time. &nbsp;</li><li>Efficient Menu Layout: Our extensive suite of services has been efficiently grouped for your ease of use.</li><li>Mobile-Friendly Design: Odin has been designed to work seamlessly on mobile devices, meaning that you can run all your checks wherever you are. &nbsp;</li><li>Client Support and FAQ Shortcuts: Our client support is always available to assist and is now easily contactable via our Partners Platform. Likewise, our FAQs can now be accessed directly via our Partners Platform to ensure you can always find an answer to your questions. &nbsp;</li><li>Easily Customisable User Profiles: For your convenience, user details like passwords and mobile numbers can now be easily changed in the settings.</li></ul><h2>Upgrades to Performance and Stability &nbsp;</h2><div>Odin has been built from the ground-up to ensure industry-leading performance and usability. &nbsp;</div><div> </div><ul><li>Greater Stability: Our underlying architecture and has been designed to ensure consistent stability so that you can perfectly execute your workflows, every time. &nbsp;</li><li>Fast Load Times: Pages and services load quicker for an effortless user experience. &nbsp;</li></ul><div>These improvements to efficiency and stability ensure the best possible user experience for you and your company. &nbsp;</div><div>&nbsp;</div><h2>How Can I Access the New Partners Platform? &nbsp;</h2><div>Odin can be accessed via our website.&nbsp;</div><div> </div><div>Find the “Login” button at the top right of our homepage and proceed through the Single Sign-On (SSO). &nbsp;</div><div> </div><div>If you are an active client, you will be directed to our new Partners Platform and can instantly begin using our services. No integration required. &nbsp;</div><div>&nbsp;</div><h2>What is Happening to the Old Partners Platform? &nbsp;</h2><div>For the next two months, ThisIsMe’s new Partners Platform (codenamed Odin) will be fully accessible and usable alongside our outgoing Partners platform. &nbsp;</div><div> </div><div>A final sunset date for the outgoing platform will be announced soon. &nbsp;</div><div> </div><div>We recommend that all our clients begin using Odin now to access our new services and take advantage of all the improvements offered by Odin. &nbsp;</div><div>If you have any questions about the transition over to ThisIsMe’s new Partners Platform, please reach out to support@thisisme.com.&nbsp;</div><div>&nbsp;</div><div>We are excited to share our new Partners Platform with our clients and look forward to the many new services and features that will soon be added. &nbsp;</div>

Codenamed project Odin, our new Partners Platform has been in development for months and brings together many exciting projects. Odin includes several new products and features extensive improvements to every aspect of the user experience – menu layout, graphic design, technical stability and cross-platform functionality.

Odin Launch Press Release - Explore Our New Partners Platform

FIC Slams “Willful Non-Compliance"&nbsp; On the 23rd of July, the FIC issued a scathing media release criticizing various South African business sectors that retain high levels of non-compliance. &nbsp;This non-compliance relates specifically to the submissions of Risk and Compliance Return (RCR) forms, which are now a legal requirement for businesses to be FICA compliant.&nbsp;The RCR is a digital form created by the FIC. By filling it out, your company demonstrates that it understands money laundering risks and is acting in accordance with its Risk Management and Compliance Program (RMCP). &nbsp;The RCR digital forms for Directive 6 and Directive 7 can be found and completed on the FIC’s website <a href="https://www.fic.gov.za/2023/11/02/rcr/#:~:text=Directives%206%20and%207%20require,can%20lead%20to%20administrative%20action." target="_blank">here</a>. &nbsp;The deadline for the submission of the Directive 6 RCR was the 31st of May 2024. According to the FIC, the average RCR submission for Directive 6 sits at a disappointing 63%.&nbsp;Sector-specific RCR submissions for Directive 6 are: &nbsp;<ul><li>Legal Practitioners: 60% &nbsp;</li><li>Estate Agents: 66%&nbsp;</li><li>Trust Service Providers: 74% &nbsp;</li><li>Company Service Providers: 76% &nbsp;</li><li>Casinos: 100% &nbsp;</li></ul>Aside from casinos, the low rates of RCR submission has led to the FIC to criticize...&nbsp;<blockquote>“Business sectors willfully standing in the way of South Africa exiting the greylist”&nbsp;</blockquote>It is paramount that all business sectors ensure their full compliance with FICA. Without widespread compliance, South Africa cannot get itself removed from the FATF’s greylist and South Africa’s economy will continue to be strangled by international regulations and red tape. &nbsp;<h2>FIC Threatens to Issue Fines and Legal Sanctions &nbsp;</h2>With the deadline for Directive 6 compliance over two months ago, the FIC said it will begin issuing fines and sanctions on non-compliant businesses.&nbsp;<blockquote>“Institutions that have still not submitted their RCRs, are considered delinquent institutions and are automatically deemed to be at high risk of being used for money laundering and terrorist financing purposes. These institutions now face targeted inspections or targeted sanctions for their non-compliance.” - Christopher Malan, Executive Manager for Non-Compliance and Prevention.&nbsp;</blockquote>As stipulated by FICA, fines for non-compliance can be in the millions of Rands, while serious cases of non-compliance can be punished with prison sentences for accountable individuals. &nbsp;All South African businesses are therefore urged to submit their RCR and ensure their FICA compliance.&nbsp;To read the full media release by the FIC, click <a href="https://www.fic.gov.za/wp-content/uploads/2024/07/Media-Release-RCR-update-23-July-2024.pdf" target="_blank">here</a>.<h2>FICA Compliance Solutions for South Africa &nbsp;</h2>We offer a comprehensive range of due diligence solutions so that your business can ensure its FICA compliance. &nbsp;For basic FICA compliance, we provide market-leading solutions like FICA Express that verify customer identities and conduct AML Risk Screening. For larger and more complex FICA compliance demands, we offer a comprehensive range of over 45 services that can be tailored to your exact needs and provided via API.&nbsp;To explore how our full range of services can empower your business to ensure its FICA compliance, simply schedule a demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

The Financial Intelligence Centre (FIC) has slammed several South African business sectors for failing to comply with FICA and says that fines are soon to follow.

FIC Slams Business Sectors and FICA Non-Compliance, Fines to Follow

This op-ed was featured in the July issue of Automobil Magazine.&nbsp;Click <a href="https://publuu.com/flip-book/169155/1285459" target="_blank">here</a> to read the article in Automobil Magazine.&nbsp;Across nearly every industry in South Africa, 2024 has been a year of regulatory compliance. FICA has become a familiar term and as the July 31st FICA compliance deadline for motor vehicle dealers nears, ensuring nationwide compliance remains a priority. Although excellent strides have been made, we must prepare for the even stricter laws that will inevitably come. So how should we move forward to ensure success?&nbsp;First, as the providers of the customer due diligence solutions that enable FICA Compliance, the Regulatory Technology (RegTech) industry must take the lead in helping other industries understand their legal responsibilities. Many industries like motor vehicle dealers are still grappling with strict new FICA compliance obligations, and the future will only see these laws become stricter and more complex. As FICA compliance evolves, RegTech companies must help businesses understand their obligations by providing accessible information. Industry-specific guides, such as helping motor vehicle dealers understand their classification as High-Value Goods Dealers (HVGDs) [Link the High-Value Goods Dealership article], are essential.&nbsp;Second, the RegTech industry must work in partnership with other industries to understand the unique needs of the businesses they serve. FICA compliance affects dozens of industries with their own unique customer experiences and workflows. RegTech companies must develop a genuine understanding of every industry’s specific needs to develop solutions that empower businesses, not hinder them.&nbsp;Third, South Africa must approach FICA compliance as an opportunity. South Africa is still greylisted – a status that internationally stains our country’s reputation as a high risk of financial crime. This is suffocating our economy, so ensuring nationwide FICA compliance and removing our country from the greylist is vital for our future growth. The world’s developed economies are moving ahead and we cannot afford to be left behind. All industries must work together to ensure FICA compliance and build a prosperous South African economy that can take its rightful place on the world stage.&nbsp;We have an opportunity to demonstrate South African excellence. Let us seize it. &nbsp;Juan Furmie | CEO of ThisIsMe&nbsp;<hr><h2>Solutions for the Auto Industry and Motor Vehicle Dealers&nbsp;</h2>ThisIsMe is launching a comprehensive suite of products that enable us to offer a comprehensive solutions package for the automotive industry and motor vehicle dealers.&nbsp;Our range of services covers a wide range of needs&nbsp;<ul><li>Affordability Calculator</li><li>Identity Verification</li><li>PEP, Sanctions and Watchlist Screening</li><li>Bank Account Verification (AVS)</li></ul>To explore our full range of over 45 services and see how they can empwoer your business, simply schedule a tech and sales here. Lets connect.<h2> </h2><h2> </h2>

Read our op-ed featured in Automobil Magazine, discussing how to adapt to the future of FICA compliance in South Africa.

3 Ways to Navigate the Future of FICA Compliance in SA - Insights for the Auto Industry

<h1>A Brief Summary</h1><div>High-Value Goods Dealers (HVGDs) must comply with new Directives from the Financial Intelligence Centre (FIC). The Financial Intelligence Centre (FIC) has listed HVGDs as Accountable Institutions due to the high risk of their assets being used by criminals to launder money. Who is an HVGD? According to the Financial Intelligence Centre, HVGDs include any business dealing in goods with a selling price of over R100,000. </div><div> </div><div>Typical examples of HVGDs include:</div><ul><li>	Motor vehicle dealers&nbsp;</li><li>	Jewellers &nbsp;</li><li>	Fine art dealers&nbsp;</li><li>	Valuable coin dealers&nbsp;</li><li>	Antique dealers &nbsp;</li><li>	Luxury clothing and accessory dealers&nbsp;</li></ul><div>HVGDs comply with several new legal requirements concerning due diligence and identity verification. We have provided a brief summary of compliance obligations. The official Public Compliance Communication (PCC) from the FIC can be found here.</div><div> </div><div> Compliance Obligations for HVGDs Include:&nbsp;</div><ul><li>	Registration (HVGDs must register with the FIC as an Accountable Institution.</li><li>	Customer Due Diligence (HVGDs must verify the identity of all their clients participating in transactions with a total sale price of over R100,000).</li><li>	PEP, Sanctions and Watchlist Screening (HVGDs must verify that clients are not politically exposed, under sanction, or on any regulatory enforcement lists).</li></ul><div> </div><h1>We Can Help You Become Compliant</h1><div>ThisIsMe offers a comprehensive suite of products and services that can meet all your Customer Due Diligence and PEP, Sanctions and Watchlist Screening needs. Our variable access options mean that our services are accessible to every business, large or small.&nbsp;</div><div> </div><div> </div>

How we can empower HVGDs master their FICA compliance.

The FIC’s Directive 7 for High-Value Goods Dealers (HVGDs) – We Can Help

We held our first-ever Instagram Livestream Q&amp;A on the 20th of June 2024. Thank you to all our viewers who joined and asked questions. This article contains all our answers to your questions. Follow thisisme_sa_official on Instagram and join us next week Wednesday on the 26th of June for our second live stream and Q&amp;A.<h2> </h2><h2>1. I own a second-hand car dealership and need to be FICA compliant. What is the difference between KYC and Identity Verification?&nbsp;</h2>These two terms are sometimes used interchangeably, but there are differences. Know Your Customer (KYC) is a broad term that refers to all the checks done to ensure that a person is who they say they are and that the information they provide is accurate and correct. &nbsp;Identity Verification (IDV) is the process of specifically verifying personal identity, which in South Africa is most often done by cross-checking an individual’s ID number against the personal information stored at the South African Department of Home Affairs. &nbsp;IDV is typically part of the KYC process, but KYC often entails more than just verifying someone’s identity. KYC may also include checks such as screening a person for PEP and Sanction status, or running a credit check. &nbsp; <h2>2. How do I know if my business is a High-Value Goods Dealer (HVGD) in South Africa? &nbsp;</h2>A HVGD is classified as any business that sells single items for a price of R100,000 or over at the time of sale. This only applies to single items, so if multiple items are sold for over R100,000, but no single item is over R100,000, the business is not a HVGD. &nbsp;If your business fulfils these requirements and is a HVGD, you must register with the FIC and draw up a Risk Management and Compliance Program (RMCP). When a HVGD sells an item for R100,000 or more, that business must verify the identity of the individual and screen them for PEP and Sanction status. For more information, read our comprehensive guide <a href="https://thisisme.com/insights/what-is-a-high-value-goods-dealer-in-south-africa" target="_blank">here</a>.The deadline for this compliance is coming up on the 31st of July 2024. ThisIsMe offers the exact checks that HVGDs need to be compliant with the FIC. To schedule a demo to see how our services can empower you to be compliant with FICA, simply book a sales demo <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp; <h2>3. What is the difference between an RMCP and RCR?&nbsp;</h2>A Risk Management and Compliance Program is a comprehensive document that outlines what money laundering-related risks a company faces and what processes it has put in place to effectively and reasonably mitigate those risks. &nbsp;Properly developing an RMCP is a complex process that must be done with the correct professional assistance. We do not recommend relying upon the free RMCP templates that are available online, as the majority of these templates fail on audit. Failing an RMCP audit will cost your company time and money and should be avoided.&nbsp;We have a network of qualified professionals who can assist your company with the completion of its RMCP. We will gladly connect you with these professionals and assist you throughout your compliance journey.&nbsp;A Risk and Compliance Return (RCR) is “smaller” a digital form created by the FIC. By filling it out, your company demonstrates that it understands money laundering risks and is acting in accordance with its Risk Management and Compliance Program (RMCP). This form must be completed digitally and can be found on the FIC’s website <a href="https://www.fic.gov.za/2023/11/02/rcr/" target="_blank">here</a>.&nbsp; <h2>4. What is the difference between the FIC and the FSCA? &nbsp;</h2>The <a href="https://www.fic.gov.za" target="_blank">Financial Intelligence Center (FIC)</a> is South Africa’s financial intelligence unit and is responsible for setting country’s framework for anti-money laundering and countering the financing of terrorism and proliferation (AML/CFT). The FIC creates South Africa’s legislation, receives regulatory reports and transaction and other data from accountable institutions and other business, interprets this data, and then produces financial intelligence from this data for relevant authorities to use in their investigations and prosecutions.&nbsp;On the other hand, the <a href="https://www.fsca.co.za/Pages/Default.aspx" target="_blank">Financial Sector Conduct Authority (FSCA)</a>, is primarily tasked with enforcing compliance with the FIC’s legislation. The FSCA supervises and enforces South Africa’s compliance with the FIC Act and in accordance with a Risk-Based Approach (RBA).&nbsp;In other words, the FIC is more of a lawyer, while the FSCA takes on a policeman-style role.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

Read the questions and answers from our first-ever Q&A hosted on Instagram Live on June 20th, 2024.

Livestream Q&A Response - KYC vs IDV, FIC vs FSCA, and more

<h2>Understanding Terms within FICA Compliance Dialogue</h2>South African businesses are grappling with ensuring their FICA compliance. With the Directive 6 deadline on the 31st of May and the Direct 7 deadline on the 31st of July, many businesses are struggling to understand the differences in anti-financial crime terminology.This article will break down some common phrases and clear up common confusion.What are some Common Anti-Financial Crime Terms?- &nbsp; &nbsp; &nbsp; AML (Anti-Money Laundering)- &nbsp; &nbsp; &nbsp; KYC (Know Your Customer)- &nbsp; &nbsp; &nbsp; CCD (Customer Due Diligence)<h2>How Does AML Screening Relate to Anti-Financial Crime?</h2>Anti-financial crime is arguably the broadest term available to describe the ways in which governments, authorities, legislature, businesses and industry professionals coordinate to prevent and mitigate financial crime.This is because anti-financial crime is an umbrella term that covers all of the more specific subtopics, such as identity fraud, money laundering, and countering the financing of terrorism.Anti-Money Laundering (AML) specifically refers to the interconnected web of laws and practices designed to uncover the finances and capital generated from illegitimate sources, such as violent crime or fraud.Therefore, although AML laws are closely tied to anti-financial crime, AML is a subcategory/subtopic within the broader discussion of anti-financial crime.<h2>KYC Verifications and AML are NOT the Same</h2>Know Your Customer (KYC) is the process by which a business will verify the identities of their customers/clients to ensure that they are who they say they are.This verification process designed to make it impossible to commit financial crimes such as money laundering or fraud.&nbsp;&nbsp;KYC checks form a vital part of AML. By verifying an individual’s identity during the sign-up process with a business or financial institution, it makes it far harder for that individual to launder money without being caught.<h2>Differences Between Know Your Customer (KYC) and Customer Due Diligence (CDD)</h2>These two phrases are often used interchangeably, but there are notable differences between the two.In short, KYC typically refers to the initial checks that are done on a customer, whereas CDD typically refers to the entire lifecycle of a customer and all the due diligence checks run during this time.&nbsp;More specifically, KYC typically refers to the initial identity verification checks that are done during the onboarding process. For example, the process of verifying a customer’s identity and personal information during the initial sign-up process would fall under the term KYC.CDD, on the other hand, will cover all of the continuous monitoring and customer rescreening checks that are done so long as the customer remains in a company’s client database. For example, businesses in South Africa are now obligated to periodically rescreening their customer databases in accordance with their Risk Management and Compliance Program (RMCP) so as to ensure that all customer information is up-to-date.<h2>FICA Compliance Solutions for South Africa</h2>As South Africa’s leading provider of KYC, CDD and AML screening solutions, we can help your business to become FICA compliant. To schedule a demo and see how our products and services can empower your business, simply schedule a demo <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.

With so many terms and phrases flying around as businesses grapple with ensuring their FICA compliance, we have broken down the differences between three common terms: KYC, CDD and AML.

FICA Compliance – 3 Differences Between KYC, CDD and AML Explained

<h1>What is a High-Value Goods Dealer (HVGD) in South Africa?</h1><div>South Africa’s primary anti-financial crime legislation, the Financial Intelligence Centre Act (FICA), has been changed to update the number of businesses that are classified as Accountable Institutions (AIs). As part of these changes, dozens of new businesses are now classified as High-Value Goods Dealers (HVGDs).</div><div>&nbsp;</div><div>So, what is a HVGD?</div><div>&nbsp;</div><div>A HVGD is any business that receives payments of R100 000 or more per item.</div><div>&nbsp;</div><div>For example, a business that sells a luxury handbag for R113,000 is classified as a HVGD.</div><div>&nbsp;</div><div>HVGDs include businesses that sell an item for a total value of R100 000 even if that value is split up over several transactions. For instance, a business that sells a luxury watch worth R150 000 paid for in three transactions of R50 000 each is still classified as a HVGD.</div><div>&nbsp;</div><div>Furthermore, if a business sells only one item worth over R100 000, that business is still classified as a HVGD and must adhere to FICA’s compliance obligations.</div><div>&nbsp;</div><div>Finally, a High-Value Good can be first-hand, second-hand, or fifth-hand. How new the item is does not affect its high-value good status. A 1940s Rolls-Royce or century-old painting will both still be classified as a high-value good, provided their value is over R100 000.</div><div>&nbsp;</div><h1>Which Transactions do NOT Make You a HVGD?</h1><div>First, multiple smaller items that are each worth less than R100 000, yet total over R100 000 when added together, do not entail a high-value goods transaction. For example, five handbags worth R40 000 do not classify a business as a HVGD.</div><div>&nbsp;</div><div>Second, non-tangible items like stocks and cryptocurrency are not classified as High-Value Goods. This means that businesses like cryptocurrency exchanges and Forex traders are not classified as HVGDs (although they are bound by other stipulations in FICA).</div><div>&nbsp;</div><div>What Are Common Examples of HVGDs?</div><div>&nbsp;</div><ul><li>Motor vehicle dealers (Passenger and commercial vehicle dealers, both first-hand and second-hand)</li><li>Truck and bus dealers</li><li>Heavy equipment and machinery dealers (construction and farm equipment, etc.)</li><li>Boat dealers</li><li>Rare earth dealers (gold bars, platinum, etc.)</li><li>High-end jewellery dealers (watches, diamonds and gold)</li><li>Kruger Rand dealers</li><li>Fine art dealers (famous paintings, sculptures, etc.)</li></ul><h1>What Does Directive 7 Mean for High-Value Goods Dealers (HVGDs)?</h1><div>The FIC’s Directive 7 requires HVGDs to conduct two crucial forms of customer due diligence checks:</div><div>&nbsp;</div><ol><li>Identity Verification: HVGDs must verify the identity of all customers. ThisIsMe provides identity verification services that allow your business to easily verify customer identities using only their South African ID number.</li><li>PEP and Sanctions Screening: HVGDs must screen all customers for Politically Exposed Person (PEP) and Sanction status. ThisIsMe provides world-class PEP and Sanction screening services to help your business ensure FICA compliance.</li></ol><h1>Must HVGDs also Verify and Screen Their Employees?</h1><div>Yes. Directive 8 of the FIC Act requires that all HVGDs are legally obligated to conduct due diligence on their employees.</div><div>&nbsp;</div><div>As with their customers, HVGDs must therefore verify the identities of all their employees and screen them for PEP and Sanctioned status.</div><div>&nbsp;</div><div>This must be done for all existing employees, as well as any future employees when they become employed by the HVGD.</div><div>&nbsp;</div><div>Most importantly, all customer due diligence and employee due diligence checks must be done in accordance with the company’s Risk and Compliance Return (RCR) and Risk Management and Compliance Program (RMCP).</div><div>&nbsp;</div><h1>What is an RCR?</h1><div>An RCR is a digital form created by the FIC. By filling it out, your company demonstrates that it understands money laundering risks and is acting in accordance with its Risk Management and Compliance Program (RMCP).</div><div>&nbsp;</div><div>A properly completed RCR will detail how your business as a HVGD employs identity verification and PEP and Sanctions Screening services to identify and mitigate risk.</div><div>&nbsp;</div><div>For High-Value Goods Dealers, the deadline for the submission of your RCR is the 31st of June.</div><div>&nbsp;</div><div>This form must be completed digitally and can be found on the FIC’s website <a href="https://www.fic.gov.za/2023/11/02/rcr/" target="_blank">here</a>.</div><div>&nbsp;</div><h1>What is an RMCP?</h1><div>Our comprehensive range of services means that we can supply your company with the tools it needs to comply with the specific requirements for identity verification that are stipulated by the RCR.</div><div>&nbsp;</div><div>However, for your company to be fully compliant with the FIC, our verification tools must be used in accordance with your company’s Risk Management and Compliance Programme (RMCP).</div><div>&nbsp;</div><div>Properly developing an RMCP is a complex process that must be done with the correct professional assistance. We do not recommend relying upon the free RMCP templates that are available online, as the majority of these templates fail on audit. Failing an RMCP audit will cost your company time and money and should be avoided.</div><div>&nbsp;</div><div>We have a network of qualified professionals who can assist your company with the completion of its RMCP. We will gladly connect you with these professionals and assist you throughout your compliance journey.</div><div>&nbsp;</div><h1>Identity Verification and PEP and Sanctions Checks for South Africa</h1><div>ThisIsMe is South Africa’s leading provider of identity verification and risk assessment solutions. We offer a wide range of FICA-compliant KYC services that encompass politically exposed person checks, account verification services, and company sanction and credit checks. To experience our full suite of due diligence solutions and see how we can help your business meet its FICA compliance obligations, schedule a demo by contacting our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.</div>

Understand what businesses are classified as High-Value Goods Dealers (HVGDs) in South Africa and how HVGDs can comply with FICA.

What is a High-Value Goods Dealer (HVGD) in South Africa?

<h2>What is AML Compliance?&nbsp;</h2>Anti-Money Laundering (AML) is a broad term that encompasses the vast array of laws, regulations and policies that are created and implemented to combat money laundering and other associated types of financial crime. Ultimately, these laws aim to make it impossible to make use of any revenues generated by criminal activities.Every year, hundreds of millions of dollars are handed down to companies as punishment for non-compliance with Anti-Money Laundering (AML) legislation. In the most serious instances of a criminal offence, accountable individuals within these companies are charged and given jail time.&nbsp;A report by Comply Advantage has ranked the industries that incurred the highest total value of fines for AML non-compliance during 2023 (a ranking that inevitably changed every year).&nbsp;3. Gambling: $475 Million&nbsp;The gambling industry incurred the 3rd highest total value of fines within 2023. Within the gambling industry, the most common AML compliance violations included accepting bets before being formally licensed as a registered gambling institution; accepting illegal wagers; offering and awarding illegal winning bonuses; violating advertising rules; and failing to prevent excessive spending.&nbsp;2. Banking: $835 Million&nbsp;The banking industry saw a significant decrease in total annual AML-related fines in comparison to previous years.&nbsp;Nevertheless, substantial fines were still handed out, many of which were the result of major investigations and assessments being concluded. Regulatory bodies for AML compliance (such as the Financial Action Task Force (FATF) and country-specific bodies) routinely assess financial institutions to study whether they are taking sufficient action to address and mitigate the risk of money laundering.&nbsp;If such an investigation reveals shortcomings in the AML policies of a particular institution, that institution is fined. For example, an institution may be fined for failing to address deficiencies in its Sanctions and Watchlist Screening policies, a regulatory body will issue that institution with significant fines.&nbsp;1. Cryptocurrency: $5.8 Billion&nbsp;The global crypto industry amassed the highest total value for AML-related fines in 2023 with a staggering $5.8 billion – a value which results from only 11 fines.The most critical AML compliance violation was the failure to conduct identity verification checks on customers as is required by law. Such checks generally fall under the banner of Know Your Customer (KYC) checks and are provided by ThisIsMe.&nbsp;Other violations included: cybersecurity failings; failure to register as a money transmitter; and breaching of international sanctions laws.&nbsp;<h2>How to Stay AML Compliant&nbsp;</h2>Compliance with AML legislation requires a comprehensive and consistent effort to find and mitigate the risks of money laundering occurring.&nbsp;Some of the most common breaches that result in AML non-compliance include:&nbsp;<ul><li>Insufficient Customer Due Diligence and/or Enhanced Due Diligence Checks: every year, hundreds of millions of dollars worth of fines are incurred because a company did not comprehensively verify the identity of a client. This means that the proper due diligence checks – such as basic Know Your Customer (KYC) checks – were not carried out. KYC products and solutions are easy to source and implement (explore our KYC services here).&nbsp;</li><li>Improper Sanctions and Watchlist Screening: all financial institutions, such as the four listed in this article, are required to check whether an individual or entity they are doing business with has been placed under sanction anywhere in the world. This process is commonly known as watchlist screening and is an essential part of AML legislation.&nbsp;</li><li>Failure to Submit Suspicious Activity Reports (SARs): AML laws compel many companies and financial institutions to scan the transactional patterns of their clients to detect and flag transactional patterns that are suspicious and may signal an ongoing money laundering operation.&nbsp;</li></ul>Ensuring that your business stays compliant with AML regulations will require the use of several digital tools for due diligence. What are these tools and how can you access them?&nbsp;<h2>Digital Solutions for AML Compliance in South Africa&nbsp;</h2>These solutions – Know Your Customer (KYC), Enhanced Due Diligence, and Sanctions and Watchlist Screening – are all provided by ThisIsMe.&nbsp;As South Africa’s leading provider of world-class due diligence and digital onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. We offer a wide range of FICA-compliant KYC services that encompass politically exposed person checks, account verification services, and company sanction and credit checks. To experience our full suite of due diligence solutions and see how we can help your business meet its AML/CFT regulatory obligations, schedule a demo by contacting our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.

Which industries incurred the largest total AML non-compliance fines in 2023 and what can your business do to easily ensure its AML compliance?

3 of the Biggest AML Compliance Fines Given in 2023 – Industry Breakdown

<h2>South Africa’s Corruption Index Gets Worse&nbsp;</h2>Transparency International – a global non-profit organization dedicated to monitoring and combatting corruption – has released its most recent evaluation of South Africa’s corruption levels.&nbsp;Transparency International rating the country at 41/100 for 2023. The lower the score out of 100, the more corrupt the country.Since 2021, South Africa’s rating has decreased by five points in eight years. From a high of 46/100 in 2016, the country’s rating has slid down to 41/100 in 2023.&nbsp;What do these worsening corruption levels mean for South African businesses? Here are three key points.&nbsp;<h2>1.	Adverse Media Checks are Becoming Essential for Reputational Risk&nbsp;</h2>Adverse media is undesirable or negative information regarding an individual/legal entity. This negative information and/or news coverage can be discovered across a variety of sources, such as news sites, online blogs and social media posts.&nbsp;An example of adverse media could be news articles reporting on a large corporation’s involvement in a corruption scandal – hundreds of these high-profile stories are published every year.&nbsp;An adverse media check is a “scan” used to detect such undesirable or negative information. If done correctly, an adverse media check can reveal a party’s involvement or complicity in serious events such as corporate fraud, political corruption and organized crime.&nbsp;Adverse media checks are often conducted in conjunction with sanctions checks and will therefore form part of a company’s risk mitigation strategy and AML/CFT regulatory compliance framework.Furthermore, in a country where corruption is rife, adverse media checks are a valuable tool for protecting your company’s reputation. Thousands of businesses in South Africa have been caught up in corruption scandals. Every time that this happens, adverse media is generated on such businesses, which can then negatively impact your business.&nbsp;If your business has invested in building a strong reputation based on trust and accountability, it can be destroyed if you enter into a partnership with a business that has previous or existing corruption allegations against it. Adverse media checks empower your company to better mitigate these risks.&nbsp;Click here to read our detailed explanation of the importance of adverse media checks.&nbsp;<h2>2.	Politically Exposed Persons (PEPs) are a Persistent Risk&nbsp;</h2>A PEP is an individual who currently hold or have held political power. Due to the interwoven nature of politics and private capital, governments and financial institutions worldwide agree that PEPs represent an increased money-laundering risk. This is because individuals who hold political power can abuse their power to engage in money laundering and other financial crimes like corruption, bribery, embezzlement and the financing of terrorism.&nbsp;The risk posed by PEPs skyrockets in countries where corruption is widespread, especially if this corruption is present at the national and local levels of government.&nbsp;In addition to being a reputational risk, PEPs also remain a compliance risk. In South Africa, many companies are legally obligated to conduct PEP checks on individuals before doing business with them, as well as implementing additional due diligence measures if a client is revealed to be a PEP.&nbsp;ThisIsMe offers PEP checks and sanctions scans that empower your business to easily stay compliant.&nbsp;<h2>3.	Sanctions Checks and Watchlist Screening Becomes an Essential Tool&nbsp;</h2>Sanctions and Watchlist Screening is an essential for two reasons.&nbsp;First, such due diligence checks are required by Anti-Money Laundering (AML) legislation. Failing to comply with this legislation can result in significant fines and even criminal charges, as well as reputational fallout.&nbsp;Second, a comprehensive sanctions and watchlist screening protocol becomes even more essential in countries with widespread corruption. This is because when corruption in a country is widespread, corrupt deals are often done with businesses and individuals in other countries and jurisdictions.&nbsp;To mitigate this risk, ThisIsMe offers a range of business due diligence services that empower you to protect your reputation and always know who you are dealing with.&nbsp;<h2>PEP Checks and Adverse Media Check Services for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and automated digital onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.

Transparency International has downrated South Africa's levels of corruption, meaning that the country is sinking further and further below the globla average. What does this mean for your business?

3 Ways South Africa’s Worsening Corruption Affects Regulatory Compliance

<h2>What are Politically Exposed Persons (PEPs)?&nbsp;</h2>Broadly, the concept of a Politically Exposed Person (PEP) refers to individuals who currently hold or have held political power.Due to the interwoven nature of politics and private capital, governments and financial institutions worldwide agree that PEPs represent an increased money-laundering risk. This is because individuals who hold political power can abuse their power to engage in money laundering and other financial crimes like corruption, bribery, embezzlement and the financing of terrorism.There are many types of PEPs with their own special designations and compliance obligations that companies must scan for to remain compliant. Other types of PEPs include <a href="https://www.thisisme.com/resources/domestic-prominent-influential-person-dpip" target="_blank">Domestic Prominent Influential Persons (DPIPs)</a> and<a href="https://www.thisisme.com/resources/Foreign-Prominent-Public%20Official-FPPO" target="_blank"> Foreign Prominent Public Officials (FPPOs)</a>.&nbsp;To read our comprehensive guide on Politically Exposed Persons, click <a href="https://www.thisisme.com/resources/politically-exposed-person" target="_blank">here</a>.&nbsp;<h2>Why Political Elections Increase the Risk of AML/CFT Non-Compliance&nbsp;</h2>Political elections, especially on the national/presidential levels, can drastically transform a country’s political landscape. If there is a major transfer of power, a country’s leaders, members of parliament, diplomats and junior party members can all be reshuffled or placed in positions of power for the first time ever.&nbsp;This means that a country can suddenly gain hundreds of new individuals who classify as PEPs. Furthermore, every family member and close associate of these PEPs must also be noted and will often classify as PEPs themselves, making the new lists even longer.&nbsp;South Africa’s 2024 election has the potential to drastically change the political landscape. The political order in cities, provinces and the entire country has the potential of changing significantly – cities, provinces and the entire country may change leadership.&nbsp;This means that South Africa’s lists of who is a PEP and who is under sanction may change drastically in a very short amount of time – a change that poses a risk for continued <a href="https://www.thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT compliance</a>.&nbsp;This risk is further complicated by the variety of other elections that are happening around the world in 2024. This is because sanctions screening is done internationally, which means that a company’s AML/CFT compliance must consider and adapt to global political changes – sanctions screening must, therefore, always be done on international sanctions lists.&nbsp;To find out more about ThisIsMe’s sanctions screening solutions, read our comprehensive overview <a href="https://www.thisisme.com/resources/sanctions" target="_blank">here</a>. &nbsp;Other Major Elections Happening in 2024 – Regional Overviews&nbsp;<ul><li>Africa (South Africa, Mali, Madagascar, Algeria, Ghana, Mozambique, Chad, Rwanda)</li><li>Middle East (Pakistan, Iran, Syrian Arab Republic)</li><li>Europe (European Union, United Kingdom, Ukraine, Romania)</li><li>The Americas (United States of America, Mexico, Venezuela)</li><li>Asia (India, Indonesia, Bangladesh, Russian Federation, North Korea, Taiwan)</li></ul>Arguably the highest profile election set for 2024 is the United States presidential election in November 2024. However, all of the other elections listed above, as well as the many others that are not included, will all have a significant impact on AML/CFT compliance obligations.&nbsp;<h2>How to Stay Compliant with AML/CFT Laws – The Importance of Ongoing Monitoring&nbsp;</h2>The cost of not staying compliant with AML/CFT laws is immense. Punishments for non-compliance range from fines that can total in the millions of dollars, all the way to prison time for the compliance officers who are responsible for ensuring continued regulatory compliance.&nbsp;<a href="https://www.thisisme.com/contact-us" target="_blank">Ongoing monitoring</a> – a solution offered by ThisIsMe – constantly checks a list of individuals and entities against international sanctions lists.&nbsp;This means that your company does not have to worry about always checking these sanctions lists in order to stay compliant; all of those checks are done in the background, thereby keeping your company secure and compliant.&nbsp;<h2>Sanctions Scanning and Ongoing Monitoring Solutions for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class identity verification, data validation and due diligence solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of solutions and experience how we can help your business meet its regulatory compliance obligations, book a demonstration by contacting our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.

2024 is set to contain many general elections all around the world, meaning that there will be an increased risk of AML/CFT non-compliance. Find out how to stay compliant with ThisIsMe's ongoing monitoring solution.

Why 2024’s Elections Make PEP Checks and Sanctions Scanning So Essential

<h2>What is Beneficial Ownership?&nbsp;</h2><a href="https://www.thisisme.com/resources/beneficial-ownership" target="_blank">Beneficial Ownership</a> refers to the ownership structures of legal entities like companies and trusts. When establishing beneficial ownership, one is establishing exactly which individual benefits from the privileges associated with ownership of a legal entity (such as profits).&nbsp;Sometimes, the actual owner of a company is not the same individual under whose name the company’s title is listed on paper. In other words, although the title for Company X may be under the name of Mr Allen, Company X may actually belong to Mrs James. In this case, Mrs James is the Ultimate Beneficial Owner (UBO).&nbsp;Because Mrs James is the UBO, it means that she is the person who ultimately benefits every time the business initiates a transaction.&nbsp;Establishing the beneficial ownership of an entity can be challenging. Ownership structures may be designed to be highly convoluted and complex – either legally or illegally so – for several reasons. It should be noted that beneficial ownership structures are legal, so long as they are explicitly declared.To gain a comprehensive understanding of beneficial ownership, read our breakdown <a href="https://www.thisisme.com/resources/beneficial-ownership" target="_blank">here</a>.&nbsp;<h2>What are the Global Standards for Beneficial Ownership Laws?&nbsp;</h2>Countries all around the world are grappling with how to best regulate Ultimate Beneficial Ownership (UBO).&nbsp;A <a href="https://get.complyadvantage.com/insights/the-state-of-financial-crime-2024-download?utm_campaign=CA0001.1%20%7C%20State%20of%20Financial%20Crime%20SOFC%202024%20%7C%20AMER%20%7C%20APAC%20%7C%20EMEA&amp;utm_medium=email&amp;_hsmi=290187304&amp;_hsenc=p2ANqtz--d1_s2Q7QNrgGy_pv6mbRebw8RiKuAFHf9EUGPZPg5ZzysGOATMBZZQHa40rj4DyXHm9GfjEMNpZrJC6a0lkRqet1KYQ&amp;utm_content=290173079&amp;utm_source=hs_email" target="_blank">recent survey</a> by Comply Advantage discussed several global patterns related to Beneficial Ownership regulations. One notable finding was the extent to which companies believed that UBO was an issue worth regulating.&nbsp;<blockquote>“40% of the surveyed firms said that UBO was an area of AML regulation that could be tightened to combat financial crime in their countries effectively – the third-highest answer given” – Comply Advantage, The State of Financial Crime 2024.</blockquote>This desire to tighten UBO legislation reflects the fact that, all around the world, UBO laws are highly varied and are often too lax.&nbsp;These issues have been recognized by the Financial Action Task Force (FATF). The FATF -- an international regulatory body responsible for establishing AML guidelines – announced in October 2023 that it is revising its guidelines for UBO legislation.&nbsp;The new guidelines will advise on the best recommendations for risk-based practices. The adoption of risk-based practices for beneficial ownership is in line with the FATF’s 2014 adoption of the Risk-Based Approach (RBA) for the structuring of Anti-Money Laundering (AML) regulations.&nbsp;The final draft of the FATF's new guidelines will help inform changes in jurisdictions like the European Union and the United States. Although precise details are yet to be finalised, the new UBO guidelines will certainly call for greater corporate transparency concerning beneficial ownership structures, as well as harsher penalties for infringements.<h2>How Do South Africa’s New Beneficial Ownership Laws Compare?</h2>South Africa has passed new beneficial ownership laws that change the way that businesses must register in South Africa. As of 2024, South African businesses must officially register their UBO structures with the Companies and Intellectual Properties Commission (CIPC).&nbsp;Some general compliance obligations for businesses in SA may include:&nbsp;<ul><li>All companies must declare and formally register their beneficial ownership structures with the CIPC.&nbsp;</li><li>All individuals and/or entities that hold more than 5% beneficial ownership of a company or close corporation must submit a register of beneficial owners to CIPC.</li></ul>To further understand how businesses are impacted by South Africa's new UBO laws, read our comprehensive overview <a href="https://www.thisisme.com/insights/SAs-New-Beneficial-Ownership-Laws-How-Are-Businesses-Impacted" target="_blank">here</a>.<meta charset="UTF-8">South Africa's new UBO follow the trend of South Africa increasingly aligning itself with American and European standards for corporate law. For Example, South Africa's Protection of Personal Information Act (POPIA), is aligned with the standards set by the EU’s GDPR.South Africa's new UBO laws represent an important step in South Africa's efforts to align itself with global standards for UBO legislation, as well as get itself removed from the FATF's greylist.&nbsp;However, as noted by the report by Company Advantage, the global standards for UBO regulation are still being debated and tweaked. The FATF, as well as the European Union, are both in the process of analysing and reforming their UBO legislation. What form the final drafts of this legislation take, as well as the impact this will have on due diligence and regulatory compliance obligations, remain to be seen.&nbsp; <h2>Due Diligence and Identity Verification Services for South Africa&nbsp;</h2>As South Africa’s leading provider of identity verification, due diligence and risk management solutions, ThisIsMe provides world-class KYB solutions that can help your business secure its transactions and verify whom it does business with. To experience our full suite of solutions and find out how we can empower your business with class-leading tools, contact our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.

As the world struggles to regulate Ultimate Beneficial Ownership (UBO) structures, how do South Africa's new UBO laws compare and what do they mean for your business?

Beneficial Ownership Trends for 2024 – How Does South Africa Compare?

<h2>What Are AVS Checks?&nbsp;</h2>Broadly, <a href="https://thisisme.com/resources/account-verification-service" target="_blank">Account Verification Services </a>verify information about a bank account, such as the identity of its owner and the type of account.&nbsp;AVS checks typically work by cross-checking the identity of the account holder against the bank account number provided. This validates firstly that a bank account is legitimate, and secondly, that it is owned by a verified individual and not a fraudster.Most commonly, AVS checks are used to verify that an individual is the actual owner of the bank account number that they provide.To read our comprehensive guide on how AVS Checks are used, click <a href="https://thisisme.com/resources/account-verification-service" target="_blank">here</a>.&nbsp;<h2>How Are AVS Checks Used?&nbsp;</h2>AVS checks are important because they ensure transparency and reduce fraud. By verifying the identity of a bank account owner, AVS checks help businesses to ensure important information, such as the account they are paying into actually belongs to the person they think it does, or that the account they are receiving payments from is actually owned by the individual whose identity they are dealing with.Conducting AVS checks empowers a business to <a href="https://thisisme.com/resources/risk-assessment" target="_blank">scan for red flags</a> such as discrepancies relating to account owner information. Should red flags emerge as a result of the AVS check, a business can account for the heightened risk and take the appropriate risk mitigation steps.&nbsp; Accordingly, the failure to conduct AVS checks can expose businesses to heightened levels of risk.In many countries, AVS checks are a legal requirement that financial institutions are legally obligated to conduct. Regulatory compliance obligations concerning AVS checks are an important part of national <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT legislation</a> designed to combat financial crime.&nbsp; Failure to comply with these regulatory obligations can lead to national regulators imposing severe punishments on the offending business – fines and even jail time can be issued as punishments for non-compliance or active breaches in national AML/CFT law.<h2>AVS Checks Help Protect Your Business Fraud</h2>Significant fraud occurs in the faking of payments in business relationships.&nbsp;AVS checks have a near-endless list of use cases. One important example of a use case for AVS Checks is when a business is establishing a new business-to-business relationship, such as with a new supplier.&nbsp;When initiating a new business relationship, a company is exposed to a significant risk of fraud. The world’s economy – as well as South Africa specifically – is rife with examples of companies losing millions of dollars to fraudulent transactions that could have been prevented by a thorough AVS check.&nbsp;Recent years have seen a rapid increase in sophisticated credit scams that target South African suppliers. Sometimes totalling tens of millions of Rands, these types of scams target the suppliers of goods that can easily be resold, such as building materials or, in the time of COVID-19, personal protective equipment (PPE). In South Africa, <a href="https://www.youtube.com/watch?v=I8ZkpS-xMG4" target="_blank">a Carte Blanche investigation in 2021</a> investigated how suppliers were defrauded of millions of Rands of essential PPE stock at the height of the pandemic.This is where AVS checks become essential.&nbsp;Verifying a company’s bank account is an excellent way to verify the integrity of the business in question. By conducting an AVS check and verifying the account that the company registration number is linked to, a responsible business can check how long the bank account has been active – a recently created bank account is a warning sign of fraud.&nbsp;As well-performing as an AVS check is, businesses can go further to protect against fraud. Businesses can conduct a wide variety of due diligence checks to authenticate the legitimacy of a business partner. These include:&nbsp;<ul><li>Director Identity Verification: ThisIsMe offers a director lookup check that returns information concerning the identity of a company’s director – a key method of verifying their legitimacy as an individual.&nbsp;</li><li>Company Registration Checks: If a company is fraudulent, it will typically only recently have registered with the Companies and Intellectual Properties Commission (CIPC). By pulling data from the CIPC database, a thorough due diligence check will reveal the date of company registration, enterprise name and duration of registration, and tax and VAT numbers. Past and present director details that are linked to the company registration number will also be displayed.</li><li>Company Sanctions/AML Check: It is essential to ensure that the company in question does not feature on any sanction lists. In addition, identifying a company’s connection or association with any politically exposed persons is key to managing risk and ensuring that all AML/CFT compliance obligations are met before any business is conducted. &nbsp;</li><li>Company Credit Check: A company credit check is an indispensable risk assessment tool when evaluating another company’s request for credit. However, comprehensive credit checks should not be done in isolation and should return more than simply a credit score – world-class solutions will include a full company credit report, credit summaries of all the associated directors, and a calculated company risk score.</li></ul><h2>AVS Checks and Due Diligence Services for South African Businesses&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and digital onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. By supplying high-quality tools like AVS checks, we empower businesses to verify identities, validate information, secure transactions, and mitigate risk. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

An Account Verification Service (AVS) check can mean the difference between secure transactions and being defrauded of millions of Rands. This is why they are so important.

Why Account Verification Services (AVS Checks) Are So Important

<h2>What is Consumer Fraud?</h2>The terminology of financial crime is becoming increasingly complex. The sheer scale and variety of financial crime in today’s global economy have led to a dictionary’s worth of new terms: vishing, smishing, identity fraud, social engineering, money laundering, and business email compromise – a word soup of confusing terms.&nbsp;Simply put, consumer fraud is defined as “when a consumer/customer suffers from a financial or personal loss. The fraud can involve the use of deceptive, unfair, misleading, or false business practices.”&nbsp;However, as is discussed later in this article, consumers are not the only victims: businesses can also suffer significant losses that extend far beyond immediate financial losses.&nbsp;<h2>South Africa’s Record-Breaking Rate of Consumer Fraud&nbsp;</h2>A recently published <a href="https://www.sas.com/en/whitepapers/faces-of-fraud-113582.html" target="_blank">report</a> by the software and analytics company SAS has revealed the trends of consumer fraud around the world for 2023.&nbsp;The survey spanned 16 countries and interviewed 13,500 respondents. The findings were shocking.&nbsp;<blockquote>“Almost half (47%) of the consumers surveyed say they experienced more fraud in 2022, even as the pandemic subsided in many parts of the world. However, the figures are notably higher in some countries than others. South Africa topped the list at 65%”</blockquote>These trends are echo other findings which show that South Africa is becoming a haven for criminals to commit fraud, robbing the economy of millions of dollars.&nbsp;<h2>Why Your Brand Should Care about Consumer Fraud: The Peril of Broken Consumer Trust&nbsp;</h2>A critical finding of the SAS report was that consumers are increasingly holding businesses to account over financial crime and fraud – consumers are now willing to abandon a company if they experience fraud.&nbsp;<blockquote>“Globally, 89% of consumers surveyed believe that the organizations they engage with should be doing more to protect people from fraud; the numbers are even higher in Brazil (98%) and South Africa (96%).”</blockquote>Consumers are not only calling for businesses to proactively combat economic crime, but are increasingly willing to punish a business for failing to do so.&nbsp;<blockquote>“There’s also a significant commercial incentive for businesses to invest in fraud detection and prevention initiatives. Globally, 67% of those consumers surveyed said they would switch to another provider if they experienced fraud or felt that another company offered better protection. This proportion was much higher in some countries, such as South Africa (88%).”</blockquote>This means that instead of simply cleaning up after consumer fraud has taken place, it is now becoming imperative for businesses to invest in combatting consumer fraud and stopping it from happening in the first place.&nbsp;The failure to do so can seriously harm the business.&nbsp;The observation by SAS echoes calls from PwC, which has also noted how consumers are increasingly holding companies responsible for data breaches and economic crime.&nbsp;<blockquote>“[A business] can find itself punished from all quarters for its perceived inability to respond appropriately… The executives we surveyed consistently ranked reputational harm at or near the top of negative impacts from various forms of economic crime, with public perception (reputation/brand strength, business relations and share price) taking the hardest hit – a level of impact that has increased since 2016.” – PwC.</blockquote>Therefore, despite being outside of a company’s direct locus of control, consumer fraud nevertheless poses a threat to a company’s brand. Actively combatting fraud is now non-negotiable.<h2>What Can Businesses Do? The Value of Identity Verification and Due Diligence&nbsp;</h2>These risks mean that your business should work to encourage safe behaviour among its consumers, as well as train employees to be keenly aware of the threat posed by fraudsters using <a href="https://thisisme.com/resources/social-engineering" target="_blank">social engineering techniques</a>.&nbsp;To read a comprehensive analysis of the threat posed to your brand by consumer mistrust, read our article <a href="https://thisisme.com/insights/Fraud-vs-Reputation–Why-Companies-Cannot-Afford-to-Break-Trust" target="_blank">here</a>.&nbsp;However, businesses can also tighten their security by more carefully verifying their business-to-business relationships – a point of significant vulnerability and one that has historically led to some major incidences of financial crime.&nbsp;To better secure business-to-business relationships, companies can invest in due diligence tools such as director lookups, AVS checks, PEP checks, and company credit checks. Risk management tools such as these empower a company with valuable information that can then be used to inform security-conscious decision-making.&nbsp;<h2>Identity Verification, Data Validation and Due Diligence Services for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and digital onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services and understand how we can help your business secure its transactions, easily schedule a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Global rates of consumer fraud are skyrocketing and South Africa is leading the charge. Why should your business care and what can you do about it?

SA’s Growth of Consumer Fraud is World’s Highest – What Can Businesses Do?

<h2>What Are Deepfakes and Why Are They Dangerous? &nbsp;</h2>In short, a “deepfake” is a type of media (like a photo or a video) that has been digitally edited so as to replace a person’s likeness with a faked version.&nbsp;An example of a deepfake is a video of a famous person that has been edited in order to make it convincingly seem like they said something that they did not actually say.&nbsp;When it comes to <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification</a>, deepfakes can pose a genuine security threat. When they are well done, deepfakes can be used to fool low-quality facial <a href="https://thisisme.com/resources/biometric-information" target="_blank">biometric verification</a> tools that are designed to verify that a photo or video of a person is legitimate.&nbsp;Deepfakes, therefore, can sometimes be used to commit serious and costly fraud by creating fake accounts, verifying malicious transactions, and opening lines of credit by using the identity of someone else.&nbsp;<h2>Deepfake Fraud in South Africa – A Rapidly Growing Threat&nbsp;</h2>A new 2023 report on deepfake fraud has revealed its shocking growth across the Middle East and Africa (MEA) region.In 2023, South Africa experienced a shocking 1,200% increase in deepfake fraud.&nbsp;South Africa also suffered the highest number of deepfake attacks in Africa and accounted for 19.7% of all attacks.&nbsp;In the entire Middle East and Africa (MEA) region, South Africa ranks second in the growth of deepfake fraud and is outdone only by the United Arab Emirates, which suffered a 2,200% increase.&nbsp;South Africa’s 1,200% growth far outstrips the average for the MEA for a deepfake incidence rate of 452%.&nbsp;These statistics represent a serious threat of fraud that can threaten both companies and individuals.&nbsp;<h2>How to Protect Against Deepfake Fraud&nbsp;</h2>World-class facial <a href="https://thisisme.com/resources/biometric-information" target="_blank">biometric verification</a> technologies can still tell the difference between a real person and a deepfake. High-quality facial biometric services, such as those provided by ThisIsMe, offer a way to mitigate the threat of deepfake fraud.&nbsp;That being said, the most secure form of verification will always be multi-point verification, meaning that a person will be verified using several forms of verification.&nbsp;For example, a person can be verified by their Identity Document, passport, and an associated cell number and/or bank account. The more forms of verification that are used, the more reliable and secure the final verification will be.&nbsp;In the past, using multi-point verification used to compromise the customer experience by demanding several stressful and time-consuming forms of verification that made the customer develop a negative perception of the company.&nbsp;Today, however, multi-point verification has gotten sophisticated and streamlined enough that it can easily be integrated into a world-class <a href="https://thisisme.com/resources/digital-onboarding" target="_blank">customer onboarding experience</a>.&nbsp;To discover how we can equip your company with all the tools needed to combat deepfake fraud and securely and easily verify your customers, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;<h2>Identity and Facial Biometric Verification Services for South Africa</h2>By providing world-class identity verification systems, we give businesses the tools they need to effectively mitigate risk and place trust in their transactions.&nbsp;<meta charset="UTF-8">As South Africa’s leading provider of KYC, due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how we can help your business ensure regulatory compliance, mitigate risk and secure its transactions, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

South Africa has experienced one of the highest increases in deepfake identity fraud in the world - what can your business do?

Identity Fraud Has Increased by 1,200% in South Africa – What Can be Done?

<h2>What are AML/CFT Regulations and Why Are They Important?&nbsp;</h2>
Binance has been found guilty of violating AML/CFT laws in the United States. But what are AML/CFT laws?
AML stands for <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">Anti-Money Laundering</a>, while CFT stands for <a href="https://thisisme.com/resources/countering-the-financing-of-terrorism" target="_blank">Countering the Financing of Terrorism</a>. Because these two concepts are alike in several ways, they are often grouped together under the umbrella term <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT</a>.&nbsp;
<a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT</a> is a broad concept that refers to the laws and regulations governing how financial institutions must interact with their clients in such a way that actively addresses the threat of money laundering and terrorist financing.&nbsp;
In other words, <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT</a> laws are designed to combat money laundering and the financing of terrorist activity.&nbsp;
<h2>$4.3 Billion in Fines – What Did Binance do Wrong?&nbsp;</h2>
Binance – the entity that operates the largest cryptocurrency exchange in the world – has pleaded guilty in November 2023 to the wide variety of charges that had been laid against it by the United States Department of Justice.&nbsp;
As noted by the U.S. Department of Justice:
<blockquote>
“Binance Admits It Engaged in Anti-Money Laundering, Unlicensed Money Transmitting, and Sanctions Violations in Largest Corporate Resolution to Include Criminal Charges for an Executive.”</blockquote>
It is not unheard of for financial institutions like banks, hedge funds and exchanges to violate AML/CFT laws. Such financial institutions are occasionally fined – or individuals prosecuted – for minor violations that often fail to make headlines.&nbsp;
However, because Binance is a cryptocurrency exchange, Binance has always operated in a sector with little-to-no proper regulation – the world of cryptocurrencies is still not comprehensively regulated.&nbsp;
Because of this, cryptocurrencies have become infamous for scams, shady business practices, and outright widespread fraud. The fall of Sam Bankman Fried and his cryptocurrency exchange, FTX, is a well-known recent example of such fraud.&nbsp;
However, the extent to which Binance violated these laws – combined with the nonchalant and dismissive way in which Binance conducted illegal financial activity – has shocked the finance world.&nbsp;
<h2>Binance Employees Joked about Money Laundering and Financing Terrorism&nbsp;</h2>
In a press release, the U.S. Department of Justice described several of the charges on which Binance has been found guilty. &nbsp;
<blockquote>
“The violations include failure to implement programs to prevent and report suspicious transactions with terrorists — including … Al Qaeda, and the Islamic State of Iraq and Syria (ISIS) — ransomware attackers, money launderers, and other criminals, as well as matching trades between U.S. users and those in sanctioned jurisdictions like Iran, North Korea, Syria, and the Crimea region of Ukraine. By failing to comply with AML and sanctions obligations, Binance enabled a range of illicit actors to transact freely on the platform.”</blockquote>
These numerous and severe violations of AML/CFT laws are the&nbsp;
Further investigations into Binance revealed a seeming company-wide organizational culture of indifference and even dismissiveness towards AML/CFT laws.&nbsp;
In the official court filing of United States vs Binance, one charge alleged that a compliance employee for Binance wrote:&nbsp;
<blockquote>
“We need a banner ‘is washing drug money too hard these days? Come to Binance, we have cake for you.’”</blockquote>
Binance’s blatant flouting of AM/CFT laws has landed its founder-CEO Changpeng Zhao with a personal $50 million fine and barred him from any future involvement in the business. The company itself has been given a record $4.3 billion fine, potentially drastically hindering its operational capacity.&nbsp; 
As a result, Binance’s future remains uncertain, as well as the future of cryptocurrency regulation.&nbsp;
<h2>AML/CFT Legislation – How Can Your Business Ensure Compliance?&nbsp;</h2>
AML screening refers to the processes employed by an accountable institution that analyses clients and assesses their associated risk for financial crimes such as money laundering. The screening process is employed to check whether a client is, for example, featured on a sanction list or is a <a href="https://thisisme.com/resources/politically-exposed-person" target="_blank">Politically Exposed Person (PEP)</a>.&nbsp;
The exact regulatory requirements will vary depending on a wide variety of factors (e.g., the specific country in question as well as the risk-related categorization of the business/institution/organization).&nbsp;
However, there are several protocols and mechanisms for AML/CFT screening that are commonplace. They are:&nbsp;
<ul>
<li><a href="https://thisisme.com/resources/identity-verification" target="_blank">Identity Verification:</a> All money laundering screening processes will entail some degree of identity verification. These checks ensure that an institution knows exactly who a client is before conducting business with them.&nbsp;</li>
<li><a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">Enhanced Due Diligence:</a> In some cases, individuals/entities that represent a higher risk of money laundering (such as politically exposed persons) will be subjected to heightened levels of due diligence.&nbsp;</li>
<li><a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">Ongoing Monitoring: </a>In some instances, individuals and/or entities may pose a high enough AML/CFT risk to justify their continued monitoring by the AI. For example, individuals and businesses with a high degree of political exposure are legally required to be subjected to ongoing monitoring designed to ensure the continued legitimacy of their transactions. &nbsp;</li>
<li><a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT Risk Management and Mitigation: </a>An Accountable Institution (AI) is obligated to mitigate any AML/CFT risks that may arise during the initial screening process, as well as any risks that may arise long after the client has been screened. For example, if a client cannot be verified, an accountable institution cannot simply let them proceed – instead, the AI must take the necessary steps to mitigate the AML/CFT risk posed by that individual, such as restricting them from opening an account and conducting financial transactions. Or, in another instance, if ongoing monitoring of a client suddenly reveals highly suspicious transactions, it is the obligation of the AI to deal with the situation in such a way that aligns with regulatory requirements and successfully mitigates the associated risk.</li>
</ul>
<h2>Ongoing Monitoring, Sanctions Checks and AML/CFT Solutions for South Africa&nbsp;</h2>
As South Africa’s leading provider of world-class due diligence and remote onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. We offer a wide range of FICA-compliant KYC services that encompass politically exposed person checks, account verification services, and company sanction and credit checks. To experience our full suite of due diligence solutions and see how we can help your business meet its AML/CFT regulatory obligations, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.
<div> </div>

Why are Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) laws essential? The Binance experience proves why.

How Binance Facilitated Transactions for Al-Qaeda – The Failures of AML/CFT

<h2>What is South Africa’s New Financial Crimes Forensic Unit?&nbsp;</h2>The Financial Intelligence Centre (FIC) – South Africa’s <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) </a>watchdog – has created a new Forensic Unit to combat financial crimes in the country. &nbsp;The unit was officially formed and became operational in April 2023.&nbsp;The Forensic Unit will empower the FIC to effectively investigate highly complex instances of financial crime. These cases may include those related to domestic corruption and international money laundering rings and global criminal syndicates operating in South Africa, as well as cases that are still being processed in relation to State Capture. &nbsp;According to the FIC’s Executive Manager Christopher Malan, the Forensic Unit will complement the FIC’s existing structures so as to help expedite asset forfeiture and prosecutions.The addition of specific forensic capacity to the FIC will also help the FIC to build cases and bring them to court more quickly – a process that has historically been extremely long and drawn out due to a lack of this capacity.&nbsp;<h2>Why has the FIC Created the Forensic Unit? – The Fallout from South Africa’s Greylisting and a Scramble for Compliance&nbsp;</h2>Although this addition of forensic capacity to the FIC has clear benefits, the Forensic Unit has been created with one express purpose: getting South Africa removed from the <a href="https://thisisme.com/insights/Greylisting-Impact-on-SAs-Enhanced-Due-Diligence-Compliance-Obligations" target="_blank">FATF’s greylist</a>.&nbsp;For years, South Africa's judicial system suffered from a weak <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT regulatory framework</a> and systematic corruption. South Africa’s critical and pervasive legislative shortcomings have for years generated concern from finance and corruption watchdogs, with alarm bells repeatedly being sounded in the last three years. The FATF conducted its two-year <a href="https://thisisme.com/insights/SAs-Road-to-Greylisting-An-AML-CFT-Regulatory-Compliance-Timeline" target="_blank">Mutual Evaluation Report (MER)</a> on South Africa between 2019 and 2021, which evaluated the capacities of South Africa’s AML/CFT legislative framework.&nbsp;The findings of the MER were dire. The FATF’s report found widespread critical deficiencies in South Africa’s AML/CFT legislative framework and in October 2021, South Africa was given one year to correct these deficiencies or the country would face the risk of being placed on the FATF’s greylist – a status that undermines the extent to which companies and other countries can conduct financial transactions to and from South Africa.&nbsp;In its one-year grace period, South Africa failed to address the FATF’s concerns. On the 24th of February 2023, <a href="https://thisisme.com/insights/SAs-Road-to-Greylisting-An-AML-CFT-Regulatory-Compliance-Timeline" target="_blank">South Africa was greylisted by the Financial Action Task Force (FATF)</a> – a decision taken by the watchdog after South Africa failed to demonstrate that it was actively addressing critical issues in its AML/CFT legal framework. To understand more about what exactly being greylisted has meant for South Africa, read our analysis <a href="https://thisisme.com/insights/Greylisting-Impact-on-SAs-Enhanced-Due-Diligence-Compliance-Obligations" target="_blank">here</a>.&nbsp;Since being greylisted, South Africa has made concerted efforts to address the FATF’s concerns. A pertinent recent example of these efforts have been the new <a href="https://thisisme.com/resources/beneficial-ownership" target="_blank">Beneficial Ownership</a> laws implemented by the Companies and Intellectual Properties Commission (CIPC), which requires many companies in South Africa to formally register their Beneficial Ownership structures in order to increase transparency in South Africa’s economy.&nbsp;In addition to creating the new Forensic Unit, the FIC’s responsibilities have also been given an expanded to include a variety of non-financial industries. Casinos, property practitioners, gaming houses, crypto assets and trusts are now all under the purview of the FIC.&nbsp;All of these changes represent efforts by the South African state to mend its broken AML/CFT framework and repair its judicial system in order to get the country removed from the FATF’s greylist and have normal trading operations resume.&nbsp;<h2>AML, Sanctions Checks and Due Diligence Solutions for South Africa&nbsp;</h2>Although the fight against financial crime is generally spearheaded by government agencies and regulators, the private sector also has a vital role to play in combating financial crime. Compliance with laws and regulations, coupled with proper risk management and enhanced due diligence procedures, hold the key to an economy in which transactional trust is the norm, not the privileged exception.&nbsp;<meta charset="UTF-8">As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. We offer a wide range of FICA-compliant KYC services that encompass politically exposed person checks, account verification services, and company sanction and credit checks. To experience our full suite of due diligence solutions and see how we can help your business meet its AML/CFT regulatory obligations, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

South Africa's Financial Intelligence Center has created a new Forensic Unit to combat high-level financial crime. What does this mean for SA's grey listed status?

SA’s new Financial Forensic Unit – A Saviour from Corruption & Greylisting?

<h2>What is Beneficial Ownership?&nbsp;</h2><a href="https://thisisme.com/resources/beneficial-ownership" target="_blank">Beneficial Ownership</a> refers to the ownership structures of legal entities, such as companies or trusts. By identifying beneficial ownership structures, one is establishing exactly which individuals benefit from the privileges associated with ownership of a legal entity – benefits may include profits and/or leadership authority.&nbsp;Sometimes, the actual owner of a company is not the same individual under whose name the company’s title is listed on paper. In other words, although the title for Company X may be under the name of Mr Allen, Company X may actually belong to Mrs James. In this case, Mrs James is a beneficial owner.&nbsp;Establishing the beneficial ownership of an entity can be challenging. Ownership structures may be designed to be highly convoluted and complex – either legally or illegally so – for several reasons. It should be noted that beneficial ownership structures are legal, so long as they are explicitly declared.&nbsp;When beneficial ownership structures are illegally constructed, they are most often done for money laundering and tax evasion. The potential for beneficial ownership structures to facilitate illegal activity means that it is important for countries to regulate how beneficial ownership structures may legally be used, so as to reduce the chance that they are used to fund criminal activity.&nbsp;To find out more about beneficial ownership, you can read our comprehensive guide <a href="https://thisisme.com/resources/beneficial-ownership" target="_blank">here</a>.&nbsp;<h2>What New Powers Has the CIPC Been Given?&nbsp;</h2>In South Africa, the Companies and Intellectual Property Commission (CIPC) acts as the regulator for all companies in South Africa. For many years, the CIPC held centralized records of information pertaining to companies, such as director details.However, the CIPC has never maintained a record of who the shareholders of companies are or a central record of Beneficial Ownership structures for a company.Until now.&nbsp;New amendments to existing laws now empower the CIPC to demand that all companies provide accurate and up-to-date information concerning every beneficial ownership associated with a company. This means that the CIPC will now hold a central registry of all beneficial ownership structures for companies in South Africa, thereby promoting greater transparency and accountability in all business dealings in the country.&nbsp;These new powers stem from amendments to two acts, which are as follows:&nbsp; <ul><li>The 2022 General Laws (Anti-Money Laundering and the Combating the Financing of Terrorism) Amendment Act.&nbsp;</li><li>The 2022 Protection of Constitutional Democracy Against Terrorism and Related Activities Amendment Act.</li></ul>Combined, these two amendments have significant implications for most businesses operating in South Africa.&nbsp;<h2>How are Companies Affected by the New Beneficial Ownership Laws?</h2>Under these new South African laws, the exact Beneficial Ownership compliance obligations differ depending on the specific company and the nature of the industry. &nbsp;Some general compliance obligations for businesses/companies in SA may include:&nbsp;<ul><li>All companies must declare and formally register their beneficial ownership structures with the CIPC.&nbsp;</li><li>All individuals and/or entities that hold more than 5% beneficial ownership of a company or close corporation must submit a register of beneficial owners to CIPC.</li></ul>Notably, however, ThisIsMe is an identity verification, <a href="https://thisisme.com/resources/know-your-customer" target="_blank">KYC</a> and <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">AML</a> specialist company. We provide the digital tools that empower South African companies to conduct a wide range of tasks related to <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification</a>, KYC and <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT</a>.&nbsp;ThisIsMe is not a law firm and will never provide legal advice to companies. We have worked alongside several compliance specialist companies, such as Moonstone Compliance, who are better suited to helping your business understand its regulatory compliance obligations.&nbsp;Beyond legal advice, ThisIsMe will provide your company with every digital tool necessary to meet your identity verification and data validation needs, regardless of industry.&nbsp;<h2>AML/CFT, Politically Exposed Persons Checks and Sanctions Checks for South Africa&nbsp;</h2>As South Africa’s leading provider of identity verification, due diligence and risk management solutions, ThisIsMe provides world-class KYB solutions that can help your business secure its transactions and verify whom it does business with. To experience our full suite of solutions and find out how we can empower your business with class-leading tools, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

What do South Africa's new laws for beneficial ownership mean for your business's AML regulatory compliance obligations?

SA’s New Beneficial Ownership Laws – How Are Businesses Impacted?

<h2>What is Beneficial Ownership?&nbsp;</h2><a href="https://thisisme.com/resources/beneficial-ownership" target="_blank">Beneficial Ownership</a> refers to the ownership structures of legal entities, such as companies or trusts. By identifying beneficial ownership structures, one is establishing exactly which individuals benefit from the privileges associated with ownership of a legal entity – benefits may include profits and/or leadership authority.&nbsp;Sometimes, the actual owner of a company is not the same individual under whose name the company’s title is listed on paper. In other words, although the title for Company X may be under the name of Mr Allen, Company X may actually belong to Mrs James. In this case, Mrs James is the beneficial owner.&nbsp;Establishing the beneficial ownership of an entity can be challenging. Ownership structures may be designed to be highly convoluted and complex – either legally or illegally so – for several reasons. It should be noted that beneficial ownership structures are legal, so long as they are explicitly declared.&nbsp;When beneficial ownership structures are illegally constructed, they are most often done so for <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">money laundering</a> and tax evasion. The potential for beneficial ownership structures to facilitate illegal activity means that it is important for countries to regulate how beneficial ownership structures may legally be used, so as to reduce the chance that they are used to fund criminal activity.&nbsp; <h2>Are Beneficial Ownership Laws the Same Across the World?&nbsp;</h2>Across the world, Beneficial Ownership has become a foundational concept in any economy based on legitimacy and transparency. Across North America, the European Union, Southeast Asia and an increasing portion of the developing world, Beneficial Ownership laws have become a staple of national economies.&nbsp;Most countries have their own beneficial ownership laws that are tailored to fit seamlessly within their broader legislative framework, so there is no single beneficial ownership law. However, there do exist universal guidelines for good practice when designing, implementing and maintaining beneficial ownership laws.&nbsp;The Organisation for Economic Co-operation and Development (OECD) – a leading intergovernmental organization for promoting economic growth and trade – identifies Beneficial Ownership laws as central components of any strong and safe economy.&nbsp;Similarly, the World Bank advocates for Beneficial Ownership laws as an effective way to increase transparency in entrepreneurship and trade, both for Small and Medium Enterprises (SMEs) and large multinational corporations. &nbsp;Both the OECD and the World Bank clearly identify that a strong <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT regulatory framework</a> must include mandatory Beneficial Ownership lists, wherein companies are legally obligated to explicitly declare beneficial ownership structures to national regulatory authorities.&nbsp;Given that Beneficial Ownership laws are so supported and have become a foundational component of many of the world’s largest economies, why are they only being implemented in South Africa now?&nbsp;<h2>Why Have South Africa’s New Beneficial Ownership Laws Been Implemented?&nbsp;</h2>For years, South Africa's judicial system suffered from a weak <a href="https://thisisme.com/insights/How-to-Build-a-Strong-AML-CFT-System-What-Has-South-Africa-Done-Wrong" target="_blank">AML/CFT regulatory framework and systematic corruption</a> – the years of pervasive State Capture that began under the administration of Jacob Zuma fundamentally weakened South Africa’s capacity to combat severe financial crime.&nbsp;South Africa’s critical and pervasive legislative shortcomings have for years generated concern from finance and corruption watchdogs, with alarm bells repeatedly being sounded in the last three years. The FATF conducted its two-year Mutual Evaluation Report (MER) on South Africa between 2019 and 2021, <a href="https://thisisme.com/insights/SA-AML-Policy-is-Deficient-Financial-Action-Task-Force" target="_blank">which evaluated the capacities of South Africa’s AML/CFT legislative framework</a>.&nbsp;The findings of the MER were dire. The FATF’s report found widespread critical deficiencies in South Africa’s AML/CFT legislative framework and in October 2021, South Africa was given one year to correct these deficiencies or the country would face the risk of being placed on the FATF’s greylist – a status that undermines the extent to which companies and other countries can conduct financial transactions to and from South Africa.&nbsp;In its one-year grace period, South Africa failed to address the FATF’s concerns. On the 24th of February 2023, <a href="https://thisisme.com/insights/SAs-Road-to-Greylisting-An-AML-CFT-Regulatory-Compliance-Timeline" target="_blank">South Africa was greylisted by the Financial Action Task Force (FATF)</a> – a decision taken by the watchdog after South Africa failed to demonstrate that it was actively addressing critical issues in its AML/CFT legal framework. To understand more about what exactly being greylisted has meant for South Africa, read our analysis here. &nbsp;Since being greylisted, South Africa has made a concerted effort to fix the critical issues that have been highlighted by the FATF, one of which is South Africa’s lack of comprehensive Beneficial Ownership laws.&nbsp;The most recent legal changes introduced by the Companies and Intellectual Property Commission (CIPC) are therefore South Africa attempting to fix critical legal shortcomings and get itself removed off the FATF’s greylist.&nbsp;The new Beneficial Ownership laws will strengthen South Africa’s broader AML/CFT framework and make it harder for criminals to conduct illicit transactions and launder money. This will be achieved by legally obligating many businesses in South Africa to officially register their beneficial ownership structures with the CIPC, thereby promoting transparency by clearly establishing accountability.&nbsp;To read more about how this impacts your business, read our informative summary here.&nbsp;<h2>Politically Exposed Persons Checks and Sanctions Checks for South Africa&nbsp;</h2>As South Africa’s leading provider of identity verification, due diligence and risk management solutions, ThisIsMe provides world-class AML/CFT solutions that can help your business secure its transactions and verify whom it does business with. To experience our full suite of solutions and find out how we can empower your business with class-leading tools, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

South Africa's new beneficial ownership laws have serious compliance obligations for businesses. But why have they been implemented and how are they linked to greylisting?

Why Has South Africa Introduced New Beneficial Ownership Laws?

<h2>South Africa Was Greylisted – What Does This Mean?&nbsp;</h2>After the FATF released its mutual evaluation report on South Africa’s AML/CFT legislation nearly two years ago, the country has failed to sufficiently address the FATF’s concerns. As a result, South Africa was greylisted by the FATF – a decision that has undermined South Africa’s capacity to efficiently engage with international finance, and serves as another complication for those wanting to invest in the country.&nbsp;<blockquote>“Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. This list is often externally referred to as the greylist.” – FATF.</blockquote>Therefore, South Africa’s status on the greylist is not permanent. If South Africa is abe to address and fix all of the issues that caused the FATF to greylist South Africa in the first place, then the country will be taken off the greylist and international financial services industries will be able to trade in the country more easily.&nbsp;<h2>Updates from the Treasury – Worth Getting Excited For?&nbsp;</h2>The new director of the South African treasury, Duncan Pieterse, has said that South Africa has made notable progress in addressing many of the concerns raised by the FATF.&nbsp;Commenting on the progress that has been made, Mr Pieterse said that&nbsp;<blockquote>"So in both of the areas related to money laundering specifically there has been an improvement in terms of the action items that we are required to report to FATF on" - Duncan Pieterse, Director of the South African Treasury.&nbsp;</blockquote>This comment mirrors what has been said by the head of South Africa’s National Prosecuting Authority (NPA), Shamila Batohi, who told Parliament that steady progress was also being made to address the legal deficiencies in meeting FATF's requirements.The FATF is scheduled to meet in Paris to discuss the progress made by South Africa in addressing its key deficiencies – the outcomes from this conference will provide clearer indications as to whether the FATF views South Africa’s progress favourably.&nbsp;If this is the case, South Africa may be on track to gradually work its way off the FATF’s greylist.&nbsp;<h2>Enhanced Due Diligence and Risk Assessment Services for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team here.

More than seven months since South Africa was placed on the FATF's greylist, the South African Treasury has given an update on the de-listing progress.

SA Treasury Updates on FICA Greylisting Progress

<h2>DHA Downtime Alerts and System Announcements&nbsp;</h2>ThisIsMe will now be providing our customers with alerts and communications on WhatsApp.&nbsp;<ul><li>Department of Home Affairs (DHA) downtime alerts</li><li>Important System Announcements&nbsp;</li><li>Other important communications&nbsp;</li></ul><h2>What is DHA Downtime?</h2>The Department of Home Affairs's (DHA) systems frequently go out of service and become inaccessible. When this happens, we immediately notify our clients of this upstream error so that our clients are empowered to take appropriate action.&nbsp;Please note that DHA downtime is entirely out of ThisIsMe's control, as is the case with any other company that relies on the DHA to provide their services.&nbsp;ThisIsMe's new adoption of WhatsApp allows us to immediately deliver these DHA downtime alerts to our clients.&nbsp;<h2>KYC, Identity Verification and Digital Onboarding for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team&nbsp;<a href="https://thisisme.com/contact-us" target="_blank">here</a>.<meta charset="UTF-8">

Our company has begun using WhatsApp business to communicate with our clients and provide alerts and system announcements.

ThisIsMe Now Uses WhatsApp Business for Communication, Alerts and Updates

<h2>What is Synthetic Identity Fraud?&nbsp;</h2>Synthetic identity fraud is the creation of a fraudulent identity using some real and legitimate data, which is then combined with faked data – in essence, a fake identity that is enriched with real data to make it appear more legitimate.&nbsp;There is nothing entirely new about this approach to identity fraud. Instead, it represents the increasing complexity of identity fraud operations and the cunning of the fraudsters who commit these schemes.&nbsp;To overcome these increasingly complex threats, businesses must invest in high-quality and advanced KYC, identity verification and due diligence processes use the latest technologies to accurately verify identities. To find out more, speak to our team here. &nbsp;<h2>How is Synthetic Identity Fraud Committed?&nbsp;</h2>Oftentimes, the roadmap of a synthetic identity fraud scheme will align with the following steps:&nbsp;<ul><li>Using fake and real personal information/data to create a synthetic identity&nbsp;</li><li>Using this profile to apply for lines of credit and repaying them to build a trusted repayment history&nbsp;</li><li>Boosting the credit score by making consistent repayments</li><li>Once the available loans are large enough, the fraudsters will take out the largest pissible loan and disappear. &nbsp;</li></ul>The gradual nature of these sorts of identity fraud schemes make it difficult to detect and stop them.&nbsp;<h2>Who is Most Affected?&nbsp;</h2>Fake identities that are created using synthetic identity fraud are often used to commit the same types of financial crime that has historically been an issue, which includes:&nbsp;<ul><li>Taking out lines of credit&nbsp;</li><li>Purchase items with stolen bank cards&nbsp;</li><li>Launder money&nbsp;</li><li>Commit social engineering schemes to steal money&nbsp;</li></ul>Credit providers are the worst affected by these schemes. 80% of credit card fraud losses and nearly 20% of chargebacks incurred by merchants, as per research conducted by the credit bureau Experian.Although these issues primarily affect the financial services industry but has the potential to affect nearly any industry that relies on authentic identities to manage and process funds.&nbsp;These forms of fraud have significant negative impacts on businesses and consumers alike – Forbes estimates that identity fraud could defraud businesses approximately 5 billion USD in 2024.&nbsp;<h2>Identity Verification and Information Validation Services for South Africa&nbsp;</h2>By providing world-class identity verification systems, we give businesses the tools they need to effectively mitigate risk and place trust in their transactions.&nbsp;As South Africa’s leading provider of KYC, due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how we can help your business ensure regulatory compliance, mitigate risk and secure its transactions, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

In a world of rapidly evolving identity fraud techniques, new buzzwords can often be confusing. Is synthetic identity fraud simply a new buzzword, or a new and evolving threat?

Synthetic Identity Fraud Explained – New Threat or Old News?

<h2>Neo Banks – What is Different About Fully Digital Banks?&nbsp;</h2>Neo bank is a new and fancy term that broadly refers to those new banks which are primarily digital and offer little-to-no physical infrastructure or face-to-face interaction at any stage through their customer journey, instead offering all their services through digital mediums.&nbsp;However, the innovations of these new banks exposes them to new risks that may not be faced as much by more traditional banks.&nbsp;<h2>What are the Most Common Types of Fraud?&nbsp;</h2><ul><li>Identity Theft: the use of social engineering techniques – phishing, smishing and vishing – have become commonplace methods for stealing identities that can then be used to commit fraud through neo banks.&nbsp;</li><li>Account Opening Fraud: the lack of physical medium can make it easier for scammers to open fake accounts using fraudulent and/or stolen identities.&nbsp;</li><li>Money laundering: because neo banks process transactions quickly through payment gateways, the technology can make it easier for criminals to launder money than more traditional banking services.&nbsp; </li><li>Account Takeover Fraud: hackers can commit brute force attacks against entire neo banks or individual accounts, which are typically more exposed to such risks than traditional banks due to the digital nature of their services.&nbsp;</li></ul><h2>How to Prevent Fraud in Digital Banking&nbsp;</h2>The best methods and systems for preventing fraud will vary between banks. This is especially the case in jurisdictions that employ a Risk-Based Approach (RBA) to fraud prevention, as this mandates that institutions tailor their fraud prevention strategies to best mitigate the risks that specifically face them.&nbsp;Nevertheless, there some are good practices that should be universally followed in order to most effectively mitigate the threat of financial crime. These include:&nbsp;<ul><li>A Proactive Fraud Prevention Approach: designed from the ground up, a bank’s digital infrastructure should integrate robust fraud detection tools that employ modern techniques to verify identities during the customer onboarding process and excel in even the most stringent AML/CFT standards.&nbsp;</li><li>Staff Training: given the brutal effectiveness of social engineering techniques in recent years, staff should be highly trained in how to recognize social engineering techniques and handle sensitive information in a highly professional and secure manner.&nbsp;</li><li>Customer Awareness: staff training is important, but so too is the vigilance of a bank’s customers. Taking steps to best educate your customers and equip them with the skills to avoid falling victim to fraud will save a bank time and money in the future.&nbsp;</li></ul><h2>KYC, Identity Verification and Ongoing Monitoring for South Africa&nbsp;</h2>By providing world-class KYC solutions, ThisIsMe gives South Africa’s financial services industry the tools it needs to quickly and easily verify their clients and provide an excellent customer experience in the process.&nbsp;As South Africa’s leading provider of KYC, due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how we can help your business ensure regulatory compliance, mitigate risk and secure its transactions, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

As new fully digital banks rise to challenge the financial establishment by taking new approaches, so they encounter new threats. Is greater identity fraud one such threat?

Are Today’s Digital Banks More Exposed to Identity Fraud?

<h2>Kenya’s Appalling Wave of Cyberattacks&nbsp;</h2>Across the world, businesses and governments are being forced to content with the ever-growing threat of cybercrime, and cybercrime-related fraud. These new threats represent an unprecedented threat to business and consumers alike.&nbsp;However, cybercrimes and fraud pose an especially large threat in Africa. As the continent grows and becomes home to some of the fastest growing economies in the world, Africa is increasingly having to contend with increasing waves of cyberattacks and financial fraud.&nbsp;One such example is Kenya, which is racing to become a technological leader in Africa. The nation’s consequentially massive investment in the IT sector has seen domestic businesses in Kenya to embark on a race to digitalize their services. This race has exposed Kenya’s IT sector, and by extension most of its economy, to malicious cyber actors.<blockquote>Kenya has suffered a record of 860 million cyberattacks in the last 12 months, compared to 7.7 million in 2017 – a shocking 11,068.8% increase.&nbsp;</blockquote>Although Kenya’s increase in cyberattacks is incredibly high, other nations across the world are also experiencing record-high levels of cybercrime and cybercrime-related fraud.&nbsp;<h2>Rapidly Growing Threats – Cybercrimes, Fraud and Social Engineering&nbsp;</h2>Social engineering fraud – phishing, smishing and vishing, for example – has become intrinsically linked with cybercrime.&nbsp;The FBI’s Internet Crime Report details the immense growth of social engineering fraud. In 2017, the FBI recorded 25,344 incidents of social engineering fraud. By 2021, this number had grown to 323,972 – a shocking 1,178% increase in only five years. Furthermore, of the 847,376 total complaints of cybercrimes made to the FBI in 2021, 32.8% of them referenced a form of social engineering.&nbsp;The rapid increase of cyberattacks, fuelled as they are by social engineering, clearly demonstrate the ever-increasing importance of verified and trusted identities. As companies increasingly digitalize their services and customer relations, verified identities as a means for risk mitigation is becoming indispensable.&nbsp;<h2>New Legislation – Regulatory Compliance Obligations for Data Privacy&nbsp;</h2>In every country, each wave of cyberattacks brings growing calls for greater anti-cybercrime and data privacy legislation. The same is true for Kenya. The record-breaking number of cybercrimes plaguing Kenya’s economy have led to reinforced calls for new legislation that can better regulate data protection and digital security.&nbsp;New legislation will place new pressures on the financial services industry as affected businesses are obligated to take tougher action to protect their consumers against external threats – a pathway to more stringent data protection legislation that is similar to that of South Africa.&nbsp;South Africa’s Protection of Personal Information (POPI) Act has established the country as a leader on the African continent for data protection legislation. Combined with other Acts like the Financial Intelligence Centre Amendment Act (FICA), South Africa boasts an increasingly well-developed portfolio of AML/CFT and data privacy and security legislation.&nbsp;When doing business in a country and ensuring regulatory compliance, it is important to employ experts in the relevant country who are best equipped to operate within the nexus of legislation, law enforcement and economic realities while delivering high-quality and cost-effective solutions for ensuring regulatory compliance.&nbsp;<h2>Identity Verification and Enhanced Due Diligence Services for South Africa&nbsp;</h2>When verifying identities and ensuring regulatory compliance, it is important to employ experts in the specific country who are best equipped to operate within the nexus of legislation, law enforcement and economic realities while delivering high-quality and cost-effective solutions for ensuring regulatory compliance.&nbsp;As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of KYC, advanced due diligence services, risk assessment and data validation services can help your business adapt to a rapidly evolving threat landscape, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Having suffered a record number of cyberattacks, providers of due diligence and identity verification technologies must learn from the Kenyan experience.

Kenya’s 860 million Cyberattacks – Lessons for Identity Verification

Across the world, AML compliance procedures in the financial services industry play a vital role in helping to curb illicit arms trading.

Silencing the Guns - The Role of AML/CFT in Regulating the Global Arms Trade

<h2>Thank You for Speaking to Us&nbsp;</h2>It was our pleasure to meet and engage with such a wide range of companies, ranging from exciting new start-ups to some of the world’s largest financial institutions.&nbsp;We have made dozens of connections and will be reaching out and following up on every single new contact in the coming days.&nbsp;However, if you want to reach out to us as soon as possible, or if you have been referred to us by a colleague, you can easily get in contact with us.&nbsp;&nbsp;<h2>What Now? How to Take Things Forward…</h2>The easiest way is to fill out our contact form, which you can find <a href="https://thisisme.com/contact-us" target="_blank">here</a>. This will allow us to quickly schedule a meeting with you to discuss our solutions and meet your precise needs. &nbsp;Since our company’s launch, we have become South Africa’s leading provider of tools for KYC, AML and digital onboarding. We have achieved this through our commitment to understanding the problems faced by our customers and then building solutions to solve those problems.&nbsp;We look forward to understanding how we can help your business grow and thrive by solving the problems you face.&nbsp;<h2>South Africa’s Leading Provider of Digital Tools for Information Verification Systems&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, digital, remote onboarding, and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Thank you for speaking to us at the Seamless Africa conference in Johannesburg. Having made dozens of brilliant connections, what happens now, and how can we take things further?

Thank You for Seamless Africa – Now, What Next?

<h2>What is Digital Onboarding?&nbsp;</h2>The term “onboarding” refers to the process of integrating new members into an organization and/or signing up new customers. Typically, these processes will verify information – identity verification, age verification, and address validation are some examples.&nbsp;Digital onboarding simply refers to when these onboarding processes are digitalized and conducted online. Digital onboarding processes can be automated by integrating APIs.&nbsp;Digital onboarding is sometimes referred to as “remote onboarding”. Remote onboarding refers to the onboarding of employees and customers without requiring them to be physically present – something that is enabled by the digitalization of the onboarding process. Today, these terms are largely synonymous.&nbsp;For a more detailed breakdown of digital onboarding, read our comprehensive breakdown <a href="https://thisisme.com/resources/digital-onboarding" target="_blank">here</a>.&nbsp;<h2>Digital Onboarding for High Staff Turnover Industries&nbsp;</h2>Digital onboarding has great utility in countless industries, yet these technologies have had an especially profound impact on industries that experience high staff turnover rates – large retail chains are one example.&nbsp;When hiring large quantities of new staff, companies must conduct a wide range of identity-related checks on prospective employees during the hiring process. These checks include:&nbsp;<ul><li>Identity checks (to ensure the individual is who they say they are).&nbsp;</li><li>Account Verification Services (AVS) checks (ensuring the legitimacy of a bank account).&nbsp;</li><li>Criminal background checks (checking the presence of a criminal record).&nbsp;</li><li>Mobile check (confirming the authenticity of an associated cell number).&nbsp;</li></ul><h2>Why Digital Onboarding Processes Are So Important</h2>Large companies have benefited immensely from adopting digital onboarding technologies. &nbsp;Before the invention of digital onboarding tools, the process of vetting prospective employees was a lengthy and labour-intensive process. Businesses had to manually process and verify new customers which expended a significant amount of time and money.&nbsp; Today, digital onboarding tools allow for these processes to be entirely automated, saving the business time and money. Large companies can easily vet and verify a large and rapidly evolving workforce, thereby keeping the business and its employees secure.&nbsp;<h2>ThisIsMe - South Africa’s Leading Provider of Digital Onboarding Systems</h2>As South Africa’s leading provider of world-class due diligence and digital-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. By supplying high-quality tools like AVS checks, we empower businesses to verify identities, validate information, secure transactions, and mitigate risk. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;<div> </div>

What is digital onboarding and why has it transformed the employee onboarding process for high staff turnover industries?

How Digital Onboarding Tools Have Revolutionized High Staff Turnover Industries

<h2>South Africa’s Financial Services Industry&nbsp;</h2><div>Over the last several decades, many African countries have rapidly developed and worked hard to establish functional financial institutions and foster well-developed privatised financial services. These efforts have seeing varying levels of success, with many African nations still lagging behind where they need to be to fully realise the potential of their populations.&nbsp;</div><div> </div><div>However, South Africa stands out as an exception. The country has a mature and well-developed financial services industry that comprises of both large financial institutions and a vibrant start-up space.&nbsp;</div><div> </div><div>Within this context, questions arise of what value a state-owned bank would bring to South Africa’s existing financial services industry. A major driver of the project is speculated to be the government’s efforts to expand its portfolio of state-run public institutions – ongoing efforts to establish a state-run health/medical insurance scheme is a contemporary example.&nbsp;</div><div> </div><h2>Postbank – A Troubled Project Facing Serious Questions&nbsp;</h2><div>However, South Africa’s state-owned bank has faced an array of problems – and will seemingly continue to do so.&nbsp;</div><div> </div><div>Recent issues include technical errors that prevented beneficiaries from performing account withdrawals and corruption allegations concerning the continued use of an illegal 140 million Rand software contract. Most recently, in September 2023, many of Postbank’s senior leadership positions were left vacant after they were fired by the Minister of Communications and Digital Technologies.&nbsp;</div><div> </div><div>Nevertheless, the government is moving forward, and President Ramaphosa is due to sign off on the Postbank Amendment Bill – a key piece of legislation that will transfer the shareholding of the bank to government control and facilitate the establishment of a holding company for the bank.&nbsp;</div><div> </div><div>As the government moves to further develop the bank, Postbank enters a competitive national banking sector. Accordingly, its success remains to be seen.&nbsp;</div><div> </div><h2>Identity Verification and Digital Onboarding Solutions for the Financial Services Industry&nbsp;</h2><div>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. By supplying high-quality tools like AVS checks, we empower businesses to verify identities, validate information, secure transactions, and mitigate risk. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;</div><div> </div>

What is behind South Africa's push for a state-owned bank, and are its prospects good?

South Africa’s New State-Owned Postbank – More Issues

Digital financial crime has become a major threat to both consumers and businesses. the rapid digitalization of many consumer services such as banking, online retail and even many services has created new risks.&nbsp; An interview on MoneyWeb told a story of how a business associate had their personal email hacked, which criminals then used to steal a significant amount of money.&nbsp;Such stories have become increasingly commonplace as digitalization takes over the ways we do business and manage our money. As we place more trust in digital systems, criminals have more trust to exploit on digital platforms.&nbsp;<h2>Issues of Identity Verification and Online Trust&nbsp;</h2>The issue of phishing speaks to the broader challenges of digitalization faced by both consumers and businesses.&nbsp;For consumers, there must be an increasing awareness of how one’s trust can be exploited and used to commit financial crimes. An awareness of social engineering techniques such as phishing, smishing and vishing is essential to avoid falling victim to financial crime.&nbsp;For businesses, it is essential to integrate digital tools that are capable of combating financial crime on digital platforms. Digital tools for KYC checks, identity verification, risk assessment and enhanced due diligence are vital for securing South Africa’s digital environment and fostering trust in online transactions.&nbsp;<h2>Identity Verification, Risk Assessment Services and KYC Checks for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.

The risks of doing business online and the digital tools to address them.

Digital Identities and the Dangers of Phishing – Big Financial Losses

Much has been said about the potential for rapid economic development in the developing world by harnessing the lessons learnt from the developed world. In the financial services industry, especially, the development of digital banking systems to provide banking services to the poorest sectors of the population holds huge potential to boost development.&nbsp; In South Africa – a country struggling with significant unemployment rates and high levels of poverty – there have already been several successful ventures launched by established banks, as well as the launch of completely new banks that have quickly experienced great success.&nbsp;Other countries throughout Africa, South America and Asia have also greatly benefitted from these novel technologies and contemporary approaches to banking, thereby bringing previously isolated sectors of the population into the formal economy. &nbsp;<h2>Developing Markets and Technological Leapfrogging – Opportunities and Risks&nbsp;</h2>However, the digitalization of banking systems brings new risks. A shift to partial or fully digitalised banking services, which prioritise online services instead of face-to-face interaction, means that banks must adopt world-class digital tools for identity verification and Know Your Customer (KYC) checks in order to secure their digital services.&nbsp;A failure to do so exposes a bank to serious risks. First, there are basic security risks concerning financial crimes and the use of fake identities to defraud customers and steal money.&nbsp;Second, a failure to do so exposes banks to significant financial and regulatory risks, as many countries throughout the developing world are adopting increasingly stringent laws governing a multitude of factors including online security and data privacy.&nbsp;<h2>Identity Verification, Risk Assessment Services and KYC Checks for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team here.&nbsp;

How new banking tech is opening new markets, but also bringing new risks.

FinTech and Banking the Unbanked – New Opportunities and Risks

<h2>South Africa’s Sluggish Push for Digital IDs and Passports</h2>This initiative has been in action for several years in the form of a pilot project between the Department of Home Affairs and participating South African banks. It experienced great success and significant demand from banking clients, leading many to believe that the initiative had a bright future and would undoubtedly see a comprehensive, nationwide roll-out.&nbsp;This pilot project was scheduled to come to an end at the start of March 2023, but the deadline was extended and is now scheduled to finish at the start of September 2023.&nbsp;However, no further information has been released concerning future plans and roadmaps. Aaron Motsoaledi, the Minister for Home Affairs, had previously said he was expecting a full-scale roll out to nearly 50 additional branches upon the end of the pilot project, but no plan for this expansion has been revealed.&nbsp;Although entities such as FNB, Standard Bank, Absa, and Nedbank have shown interest in broadening the reach of Home Affairs services, the ultimate success of the entire project hinges on the pilot program concluding with a favourable and concrete commitment from the DHA. Without one, the project may never be restarted.&nbsp;Although the project saw high customer demand, there have been persistent difficulties in establishing additional bank branches for the distribution of smart IDs and passports. These challenges include delays in finding appropriate locations, hurdles in obtaining required authorizations, and financial limitations.&nbsp;Another major hurdle has been the quality of DHA service. The home affairs branches within the participating banks continue to operate like normal DHA satellite offices, which means that they maintain the same levels of sub-par service quality that the DHA has become notorious for.&nbsp;Although this project is a first for South Africa, the digitalization of personal identification has been rapidly progressing in other regions of the world. Luxembourg, Sweden, Estonia and Vietnam have already rolled out digital ID cards that have seen great success, while many other nations are also in the process of designing and implementing such systems.&nbsp;<h2>Identity Verification, Risk Assessment Services and KYC Checks for South Africa&nbsp;</h2>The push for digital identities throws up new challenges for data protection, online privacy, and digital security. Ensuring high-quality systems that are founded on respect for the value of personal data and underpinned by effective data protection legislation, such as South Africa’s POPIA, are essential for securing our digital future.&nbsp;ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team <a href="https://www.thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

What has happened to South Africa's push for digital identities? How a highly successful pilot project has faltered and stopped.

South Africa’s Sluggish Push for Digital IDs and Passports

The FATF has released an updated guidance note on the <a href="https://thisisme.com/resources/risk-based-approach" target="_blank">Risk-Based Approach (RBA)</a> for the real estate sector, outlining businesses operating in the sector can most effectively assess and mitigate money laundering and terrorist financing (ML/TF) risks. &nbsp;<h2>Real Estate as a Target for Money Laundering – A Pervasive Threat&nbsp;</h2>Although the real estate sector has always been an avenue through which criminal networks launder illicit funds, the real estate sector has become increasingly exposed to this threat in recent years.&nbsp;Money laundering in the real estate sector is a serious issue with far-reaching consequences. Some of the world’s most developed economies – England, Australia and the United States – have all become home to expansive money laundering networks based in the real estate sector.&nbsp;An investigation by Transparency International has shown that since 2016, over EUR 6.7 billion worth of suspicious funds has been invested in London’s real estate market alone. The UK’s national risk assessment of money laundering and terrorist financing for 2020 noted that…<blockquote>“Corrupt foreign elites continue to be attracted to the UK property market, especially in London, to disguise their corruption proceeds.” – UK Home Office.&nbsp;</blockquote>As a result, <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT regulations</a> for the industry are being tightened in an attempt to mitigate the risks that pervasive money laundering poses to the legitimacy and continued functioning of the sector.&nbsp;<h2>New Challenges, New Guidelines – Update from the FATF&nbsp;</h2>In light of this growing challenge posed to the real estate sector, the FATF has released an updated RBA guidance document to assist businesses in the real estate sector to comprehensively assess and mitigate risks.&nbsp;<blockquote>“The FATF Risk-Based Guidance to the Real Estate sector [should be] updated as a matter of priority to reflect the evolution of money laundering and terrorist financing (ML/TF) and to ensure that the sector remains well-placed to counter such activity.” – FATF.&nbsp;</blockquote>When conducting a comprehensive risk assessment in order to design an effective risk management strategy, the FATF identifies three broad categories of risk that should be considered in detail:<ul><li>Geographical risks, such as the areas of operation and those countries identified by FATF or other regional and national authorities as high-risk.</li><li>Customer risks including particular attention to any additional parties in a transaction and any underlying beneficial owners.</li><li>Transaction risks including the methods of financing and delivery channels.</li></ul>The FATF also identifies several strategies for risk mitigation that are to be employed by businesses operating in the real estate industry. Broadly, these strategies for risk mitigation include:&nbsp;<ul><li><a href="https://thisisme.com/resources/know-your-customer" target="_blank">Customer Due Diligence/Know Your Customer (KYC):</a> checks must be conducted to establish and verify the true identity of each customer and the ultimate beneficial owner of the property before the transaction takes place.</li><li>Due Diligence: if it has been reasonably established that the customer represents a lower MF/TF risk, simplified due diligence measures can be applied to mitigate lesser MF/TF risks.&nbsp;</li><li><a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">Enhanced Due Diligence:</a> in instances where the customer represents higher ML/TF risks, the business must apply more intensive identity verification and data validation checks.&nbsp;</li><li><a href="https://thisisme.com/resources/beneficial-ownership" target="_blank">Beneficial Ownership:</a> processes to establish exactly which individual benefits from the privileges associated with ownership of a legal entity.</li></ul>There are certain conditions under which the FATF recommends that a real estate business conducts enhanced due diligence on a client. These highlighted ML/TF risk factors include:&nbsp;<ul><li>Clients have links to high-risk jurisdictions (e.g., South Africa’s status as an FATF greylisted country).&nbsp;</li><li>The client is a <a href="https://thisisme.com/resources/politically-exposed-person" target="_blank">Politically Exposed Person (PEP)</a> or a family member or close associate with a PEP.</li><li>Complex ownership structures are deliberately used to obfuscate beneficial ownership.</li><li>The real estate professional has not received adequate information from the customer and has to: take reasonable steps to establish the customer’s source of wealth or source of funds; request additional information regarding the customer including further CDD information where concerns have arisen about the veracity or adequacy of information previously obtained.</li><li>Clients are involved in cash sensitive businesses or are requesting to settle a transaction by way of cash and/or VAs without transparency of the source of payment.</li></ul><h2>Why Risk Assessment and Risk Mitigation is Essential for the Real Estate Industry&nbsp;</h2>It is crucial for businesses in the real estate sector to ensure constant and full compliance with national AML/CFT laws and regulations – failure to do so can lead to the imposition of serious fines and even jail time.&nbsp;<blockquote>“A business with deficient or non-existent risk management, governance, policies, controls and procedures is exposed to considerable risks that include compliance, operational, and&nbsp;reputational risks” – FATF.</blockquote>With this in mind, the exact challenges faced by the real estate sector will vary from business to business.&nbsp;<blockquote>“Legal and regulatory frameworks vary by country and a ‘one size fits all’ approach to AML/CTF is unfeasible” – FATF.&nbsp;</blockquote>Although there are universally recognized guidelines for AML/CFT regulations, every country typically has their own set of regulatory requirements that govern how businesses, institutions and organizations in that specific country must conduct business with their customers.&nbsp;When doing business in a country and ensuring compliance with its complex financial regulations, it is important to employ experts in the relevant country who are best equipped to operate within the nexus of legislation, law enforcement and economic realities while delivering high-quality and cost-effective services. &nbsp;<h2>Enhanced Due Diligence, Identity Verification and Data Validation Services for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. We offer a wide range of FICA-compliant KYC services that encompass politically exposed person checks, account verification services, and company sanction and credit checks. To experience our full suite of due diligence solutions and see how we can help your business verify client information and meet its AML/CFT regulatory obligations, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Understand the most recent recommendations from the FATF on the using the RBA to mitigate MF/TF risks in the real estate sector.

Due Diligence and Risk Management for the Real Estate Sector

According to a report by <a href="https://www.controlrisks.com/our-thinking/insights/terrorism-financing-the-overlooked-risk-in-africa" target="_blank">Control Risks</a>, a leading political risk analysis company, terrorism financing represents a significant risk for any businesses operating in African economies. To understand how to address these threats, businesses first need to understand the nature of the problem.&nbsp;<h2>What Is Terrorism Financing and CTF?</h2>The financing of terrorism refers to the flow of capital required by terrorist organizations to buy and maintain weapons and physical assets, recruit and train new members, and plan and coordinate strategies.&nbsp;<a href="https://thisisme.com/resources/countering-the-financing-of-terrorism" target="_blank">Countering the Financing of Terrorism (CFT)</a> refers to the laws and regulations that are created and implemented to curb the financing of terrorist groups and terrorist activities. By helping to detect, track and monitor transactions linked with terrorist organizations, CFT has also played a direct role in the global fight against terrorism by effectively aiding investigations into terrorist organizations and helping to cut off sources of funding for terrorist groups.&nbsp;AML stands for <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">Anti-Money Laundering</a>, while CFT stands for Countering the Financing of Terrorism. Because these two concepts are alike in several ways, they are often grouped together under the umbrella term <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT</a>.&nbsp;The evaluation and mitigation of risks associated with terrorist financing may sometimes be overlooked, but this should never be the case – these risks are pressing and have dire consequences for businesses if they are ignored.&nbsp;<h2>Why CFT is Essential for Businesses&nbsp;</h2>The risks associated with terrorism financing are fluid and subject to change. While certain regions in the Middle East have seen a reduction in these threats, many regions and jurisdictions across Africa have seen a sharp rise in terrorist activities – groups such as Al Shabaab, Boko Haram and Al-Qaeda continue to establish a foothold on the continent.&nbsp;<blockquote>“The need to revise due diligence approaches in sub-Saharan Africa is driven by a&nbsp;security and terrorism risk environment that is at its worst since the turn of the&nbsp;century and deteriorating” – Control Risks.</blockquote>Regulators must contend with rapidly shifting landscapes and the international threat posed by the modern nature of terrorism. Laws and regulations, typically sluggish in their formulation and imposition, are struggling to address the fluid nature of modern terrorist threats.&nbsp;<blockquote>“African theatres of insecurity are also rapidly shifting… As a result, terrorism financing&nbsp;risks are beginning to extend beyond historically high-risk areas” – Control Risks.</blockquote>As regulators work to create more effective legislation and improve enforcement capacities, businesses will face the challenge of ensuring regulatory compliance in the context of rapidly evolving legal frameworks.&nbsp; <h2>The Issue of Reputational Risk&nbsp;</h2>In addition to the challenges posed by regulatory compliance, businesses will also be forced to grapple with reputational risk.&nbsp;Simply put, reputational risk is the threat posed to a business by events that have the potential to undermine or destroy a business’s reputation. These may include public scandals and, in the case of terrorism financing, regulatory scandals and indictments resulting from a business breaching legal requirements for AML/CFT-related due diligence obligations. &nbsp;Today, companies understand that reputational risks pose some of the greatest threats to a company’s success and profitability. According to a publication by Deloitte, 73% of surveyed board members identified reputational risk as the area where they felt their company was most vulnerable. Furthermore, as noted in a survey conducted by PwC…<blockquote>“The executives we surveyed consistently ranked reputational harm at or near the top of negative impacts from various forms of economic crime, with public perception (reputation/brand strength, business relations and share price) taking the hardest hit – a level of impact that has increased since 2016.” – PwC. &nbsp;</blockquote>The combined threats of breaches in regulatory compliance and reputational risk are too significant for businesses to overlook – a comprehensive <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk management</a> program that properly evaluates and mitigates these risks is essential.&nbsp;<h2>How Can Businesses Mitigate These Risks?&nbsp;</h2>The unnegotiable, primary goal of all businesses should always be to ensure full regulatory compliance, at the very minimum. This means having a detailed understanding of a country’s financial regulations and ensuring that your operations are fully compliant with them – a complex task if your operations are multinational and span several jurisdictions that have varied regulatory obligations.&nbsp;Regardless of the exact region, the vast majority of jurisdictions will require businesses to implement due diligence checks that may include the following:&nbsp;<ul><li><a href="https://thisisme.com/resources/know-your-customer" target="_blank">Know Your Customer (KYC)</a>: identity verification and data validation checks designed to establish: that an individual exists; whether that individual is exactly who they claim to be; whether that individual is eligible to receive the product or service in question; whether that individual poses a threat of money laundering or other such crime.&nbsp;</li><li>Ongoing Monitoring: continued monitoring of transactions to scan for suspicious activities that represent a higher risk of illicit activity.</li><li><a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">Enhanced Due Diligence (EDD):</a> a variety of processes that relate to the in-depth verification of information and the assessment of risk, which are deployed in circumstances were standard KYC checks are deemed insufficient to assess and mitigate risks.&nbsp;</li><li><a href="https://thisisme.com/resources/beneficial-ownership" target="_blank">Beneficial Ownership:</a> processes to establish exactly which individual benefits from the privileges associated with ownership of a legal entity.&nbsp;</li></ul>Failure to be compliant with the necessary laws and regulations can lead to strict legal penalties being imposed – harsh fines and even prison sentences can apply, as well as significant losses to market share that can fundamentally damage a business.&nbsp;To ensure regulatory compliance, businesses must partner with information verification companies that can provide high-quality yet cost-effective tools to empower the highest standards of information validation.&nbsp; <h2>Identity Verification, Data Validation and Risk Assessment Services for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Terrorism financing represents a significant risk for any businesses operating in African economies. To understand how to address these threats, businesses first need to understand the nature of the problem.

Countering the Financing of Terrorism (CFT) and Reputational Risk in Africa

South Africa has updated its national regulations concerning cryptocurrencies and cryptocurrency traders. As one of the largest cryptocurrency economies in Africa, find out how this impacts the trading of crypto in South Africa.&nbsp;<h2>The South African Crypto Market – A Haven for Scams and Financial Crime?&nbsp;</h2>According to a 2022 study by Coin Journal, South Africa is one of the largest and fastest-growing crypto economies in Africa – the country is home to 59 crypto start-ups and approximately 12.4% of the population owns crypto.&nbsp;However, South Africa has high rates of financial crime in general and has also been home to several massive crypto scams. Mirror Trading International (MTI), the South African company responsible for the largest and most costly cryptocurrency pyramid scheme of 2020, was recently slapped with a R64 billion fine.&nbsp;In light of these high rates of financial crime associated with crypto, the International Monetary Fund (IMF) in 2022 called for greater cryptocurrency regulation and criticised South Africa for being&nbsp;Two years later, in October 2022, South Africa’s financial watchdog classified crypto assets as financial products, thereby enabling them to be regulated.&nbsp;Now, roughly seven months later, cryptocurrencies and cryptocurrency traders are being hit with new regulatory compliance obligations.&nbsp;<h2>New Compliance Regulations – How Does This Impact Crypto Trading?&nbsp;</h2>The new regulations mean that cryptocurrency assets have been classified as financial products under the Financial Advisory and Intermediary Services (FAIS) Act, which means that they are subject to the Financial Intelligence Centre Act (FICA).&nbsp;In short, FICA establishes a range of obligations for identity verification and data validation checks in line with risk assessment and due diligence regulatory guidelines.&nbsp;According to CoinDesk, one of the most significant challenges for cryptocurrency trading&nbsp;Failure to comply with these new regulations could mean a fine of up to 500,000 USD and/or a prison sentence of up to&nbsp;<h2>How Can Businesses Ensure Regulatory Compliance?&nbsp;</h2>The new regulations place several new compliance obligations on CASPs. These include the fact that…<ul><li>Cryptocurrency traders must now hold a Financial Services Provider (FSP) license.</li></ul>Because Crypto Asset Service Providers (CASPs) are now designated as Accountable Institutions, CASPs must now adhere to several regulations as stipulated under the Financial Intelligence Centre Amendment Act (FICA).&nbsp;Although the exact regulatory compliance obligations may vary and the following list should not be taken as legal advice, CASPs may be obligated to adhere to requirements for:&nbsp;<ul><li>Know Your Customer (KYC) protocols&nbsp;</li><li>Identity Verification checks&nbsp;</li><li>Data Validations checks&nbsp;</li><li>Ongoing monitoring procedures to monitor for suspicious transactions and financial patterns&nbsp;</li></ul>There are some exceptions to what the Financial Services Conduct Authority considers to be regulated activity. These exceptions include:&nbsp;<ul><li>Individuals involved in mining and operating nodes support blockchain activities without direct interaction with consumers.</li><li>Service providers dealing with non-fungible tokens (NFTs) offer unique assets generated by specific code. While NFTs can be traded, the regulatory authority views them as posing lower risks compared to fungible tokens. There is ongoing discussion on whether NFTs should be considered as crypto assets and subject to licensing requirements in the upcoming revision of the FAIS Act.</li><li>Entities offering financial services related to crypto asset derivatives, which are classified as securities according to the Financial Markets Act (FMA), must either hold a license under the FAIS or adhere to the regulations outlined in the FMA.</li></ul>A newly regulated industry in South Africa, the new legislation has wide-ranging implications for South Africa’s well-developed cryptocurrency economy. To ensure transactional security and regulatory compliance, CASPs must invest in digital tools for identity verification and data validation.&nbsp;<h2>Identity Verification and Enhanced Due Diligence Services for South Africa &nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team here.

See the new regulations for cryptocurrency traders in South Africa and understand how to ensure regulatory compliance.

Update: Crypto Traders Are Now Accountable Institutions and Subject to FICA

On the 24th of February, South Africa was greylisted by the FATF after the country failed to sufficiently amend the shortcomings in its AML/CFT regulatory framework. Nearly two months later, the impact on AML/CFT laws, domestic markets and international investment have been varied, but one thing is clear: greylisting has thus far not been catastrophic for South Africa.&nbsp;<h2>How Have Global Financial Institutions and Markets Reacted?&nbsp;</h2>Global markets have reacted much the same as domestic markets: minimally. Although the days after the announcement saw the Rand drop and some negative media coverage, none of these outcomes were prolonged. Markets have proven resilient and willing to stick with South Africa for a while longer as it tries to get itself removed from the grey-list.&nbsp;<blockquote>“Our view is that the greylisting was anticipated and largely priced in by the financial markets, and therefore on its own does not present a significant risk to the stability of the SA economy.” - Thulani Kunene, Group Head of Compliance, Investec.&nbsp;</blockquote>These sentiments are echoed by Allan Gray.&nbsp;<blockquote>“Private sector companies in our country are well regarded and have long-established financial links, which will continue to operate. Legitimate investment abroad by South Africans will continue. However, the news is expected to impact sentiment and business confidence, and there will be an adjustment period as individuals and entities digest the practical implications.” – Allan Gray.&nbsp;</blockquote>Although the short-term consequences of greylisting have been minimal, analysts predict that real damage to South Africa’s economy will begin to be felt if South Africa is still greylisted two years from now. A quick resolution to the greylisting fiasco is critical.&nbsp;<blockquote>“I think in the short term the consequences will not be that bad and will be relatively immaterial. The impact will really be felt if we don't get off this list by 2025.” - Richard Wainwright, Investec Bank CEO.&nbsp;</blockquote>Within the broader context of the South African economy, the greylisting saga represents yet another unfortunate hurdle for doing business in South Africa. Alongside the national energy crisis, transportation shortfalls and low growth forecasts, the heightened due diligence obligations that come with a greylisted status may be too much for businesses to bear in the long run. The longer that South Africa remains on the greylist, the higher the chance that businesses will choose to de-risk their portfolios and cut operational costs by withdrawing from South Africa.&nbsp;<h2>How has Greylisting Impacted South African Businesses?</h2>Across the board, there has been little disturbance to operations. There were fears that South Africa being greylisted would lead to an immediate national credit rating downgrade. These fears were overblown and South Africa’s rating has remained stable. However, the longer South Africa remains on the FATF’s greylist, the higher the chance that the country will be downgraded in yet another blow to hopes of sustainable national economic growth.&nbsp;<blockquote>“The greylisting in itself does not represent any necessarily increased chance credit rating downgrade/s from the key agencies.” - Investec Chief Economist, Annabel Bishop.&nbsp;</blockquote>The primary objective of a credit rating agency is to assess the creditworthiness of a borrower. Factors driving a credit rating downgrade are primarily related to budgetary concerns on a national level – the recent national budget speech helped to reassure credit rating agencies of South Africa’s competency in handling national debt, especially in relation to Eskom.&nbsp;The longer that South Africa remains on the grey-list, however, the greater the risk that South Africa will suffer a credit-rating downgrade.&nbsp;Domestically, one of the largest impacts of the greylisting saga has been a selection of revisions to South African AML/CFT legislation that have significantly impacted some business sectors.&nbsp;<h2>Revisions to FICA – New Due Diligence and Ongoing Monitoring Obligations&nbsp;</h2>South Africa’s primary AML/CFT legislation, FICA, has been amended. The definition of what constitutes an Accountable Institution (AI) has been expanded to include a broader range of businesses, institutions and organizations, all of whom must now comply with stricter due diligence and ongoing monitoring obligations and maintain their own Risk Management and Compliance Program (RMCP).&nbsp;To better understand these critical revisions to FICA and other legislation, read our analysis here.&nbsp;These latest amendments to FICA were made in a last-ditch attempt to avoid being greylisted by the FATF. However, this was too little too late and South Africa was greylisted by the FATF one the 24th of February 2023.&nbsp;Nevertheless, if South Africa wants to get itself taken off the FATF’s greylist, further revisions to legislation will be required. The FATF’s mutual evaluation report – a comprehensive critical analysis of South Africa’s AML/CFT legislation – highlights shortcomings in the country’s laws and provides recommendations for how these should be addressed. These include major shortfalls in the identification and monitoring of beneficial ownership structures that are essential for an effective national AML/CFT legislative framework.&nbsp;<h2>What are South Africa’s Prospects for Getting Taken Off the Greylist?&nbsp;</h2>Predictions for how quickly South Africa can get itself removed from the FATF’s greylist can be informed by the experiences of other countries. Iceland, Mauritius and Serbia – three countries that were also greylisted – were able to quickly implement reforms and get taken off the greylist in under two years.&nbsp;There are hopes that South Africa will manage to follow a similar trajectory and be taken off the greylist by 2025. South Africa has a mature and well-developed financial sector that improves its chances of doing this successfully, while the government and private sector both remain strongly committed to rectifying shortfalls as quickly as possible. Critically, there are eight remaining shortfalls that must be addressed Significant progress has already been made.&nbsp;<blockquote>“South Africa’s hard work resulted in most of the identified deficiencies being addressed within the 12-month observation period afforded to South Africa.” – South African Reserve Bank.&nbsp;</blockquote>The FATF itself remains cautiously optimistic about South Africa’s prospects for removal from the greylist. The FATF has recognized and commended South Africa on the significant progress made in implementing reforms since the adoption of the Mutual Evaluation Report in June 2021. Furthermore, the FATF has also acknowledged the high-level political commitment to strengthening the effectiveness of the country’s AML/CFT legislation. South African president Cyril Ramaphosa has gone so far as to welcome heightened scrutiny by the FATF.&nbsp;<blockquote>“As a country we welcome the intensified monitoring by FATF… As a country that both values and enforces the rule of law, the grey listing is an opportunity for us to tighten our controls and improve our response to organised crime. &nbsp;This will ultimately place us on a stronger footing to effectively fight these damaging and dangerous crimes.” – President Cyril Ramaphosa.</blockquote>With strong initiative and sustained cooperation between government, major financial institutions and the private sector in general, South Africa stands a good chance of being able get itself taken off the greylist by 2025 without incurring significant damage to its economy.&nbsp;<h2>Due Diligence, Identity Verification and Data Validation Services for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team here.&nbsp;

What has been the real impact of greylisting on South Africa's economy and what does the future hold?

South Africa Greylisted – Six Weeks On, Were Fears Realistic or Overblown?

On the 29th of November 2022, Schedule 1 of the Financial Intelligence Centre Act (Fica) was amended. The Act has broadened the definition of Accountable Institutions. This means that some businesses now have legal obligations for due diligence checks. If they don’t, they face the threat of massive fines. Understanding what the new revisions to FICA, as well as what they mean for your business, is therefore essential to ensure continued regulatory compliance.&nbsp;<h2>What is the Financial Intelligence Centre Amendment Act (FICA)?&nbsp;</h2>In South Africa, an Accountable Institution is a concept that is defined and regulated by the Financial Centre Amendment Act (FICA). FICA is South Africa’s central piece of legislation for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). It governs many aspects of South Africa’s financial system, including defining and regulating the concept of an Accountable Institution and South Africa’s adoption and the Risk-Based Approach (RBA) for the country’s national AML/CFT legislation.&nbsp;<h2>What is an Accountable Institution (AI)?&nbsp;</h2>Accountable Institutions (AIs) can be broadly understood as financial institutions, businesses and organizations that, due to the financial and legal nature of their business, carry a higher responsibility towards their clients, government and society – a responsibility that means AIs are held to higher standards concerning good governance, enhanced due diligence, and risk assessment and mitigation.&nbsp;FICA classifies certain businesses, institutions and organizations as Accountable Institutions (AIs). When a financial institution, business or organization is designated as an AI, it has to comply with a wide range of regulatory requirements that cover due diligence, record-keeping, reporting of information to the Financial Intelligence Centre (FIC) and internal compliance governance.&nbsp;These revisions to FICA were made to try and avoid South Africa being greylisted by the FATF (an attempt that was unsuccessful).&nbsp;For a detailed breakdown of Accountable Institutions and a list of exactly which businesses classify as such, read our article here.<h2>How Has FICA Been Revised?&nbsp;</h2>Essentially, FICA has revised its definition of what constitutes an Accountable Institution (AI) under Schedule 1 of the Act. Because the designation as an AI largely determines what laws and regulations a business must comply by, this revision to FICA means that certain sectors and industries will now have to comply with laws that they previously did not have to consider. The complete list of revisions to FICA is laid out in Government Gazette 47596.&nbsp;The South African government aims to prevent greylisting by targeting businesses that can potentially facilitate money laundering and financing of terrorism, such as crypto asset service providers. This is achieved by designating them as accountable institutions.Other pieces of South African legislation have also been amended. Apart from the changes made to Schedule 1 of the FICA, the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill (GLA) brought about several other modifications to the provisions of FICA. These amendments became effective on December 31, 2022.Non-compliance with these regulations can result in severe penalties, including fines of up to ZAR 100 million (approximately USD 6.8 million) or imprisonment for up to 15 years. The FIC also has the authority to impose administrative sanctions, such as warnings or restrictions on business operations.ThisIsMe is South Africa’s leading provider of digital tools for identity verification, data validation and enhanced due diligence. To find out how ThisIsMe can equip your business with the tools necessary to ensure regulatory compliance with FICA, contact our team here.&nbsp;<h2>Expanded Definition of Accountable Institutions by FICA</h2>FICA has expanded its list of Accountable Institutions to include:&nbsp;•	Someone who conducts the business of establishing trust arrangements for clients.•	Someone who conducts the business of preparing for or executing transactions, including acting as a trustee, related to investing, controlling, safeguarding, or administering trust property as defined in the Trust Property Control Act.•	A cooperative bank, as defined by the Cooperative Banks Act, 40 of 2007.•	Someone who conducts the business of providing credit as defined in the National Credit Act, 34 of 2005 (NCA).•	Someone who conducts the business of providing credit in relation to any credit agreement that falls outside the scope of the NCA's application, according to the provisions of sections 4(1)(a) or (b) of the NCA.•	Someone who conducts the business of transferring money or value.•	Someone who conducts the business or operation on behalf of a client, which includes exchanging one form of cryptocurrency for another, concluding transactions that transfer cryptocurrency from one address or account to another, or safeguarding or administering cryptocurrency or an instrument that enables control over cryptocurrency.•	Someone who conducts the business of dealing in high-value goods for any transaction in which the business receives payment, in any form, equal to or exceeding R100 000.The last line requires further clarification. Writing in BusinessTech, Luke Fraser summarized the essence of the revision to FICA by explaining that:&nbsp;<blockquote>“Organisations that sell any items that total R100,000 or more to anyone in all forms of payments will be considered accountable institutions. This applies to sole proprietors, companies and all other types of business.” – Luke Fraser, BusinessTech.&nbsp;</blockquote>However, this is not entirely true. As explained by Nicole Copley in an article for the Daily Maverick, your business or nonprofit will only be considered an AI if it deals with items worth more than R100,000 on a regular basis. This means that many non-profit organizations that do not routinely display high monthly turnovers should remain exempt from the new FICA requirements.&nbsp;<h2>What Industries and Sectors are Strongly Impacted?&nbsp;</h2>As a consequence of these new revisions to FICA, some industries are going to be strongly impacted and made to comply with greater due diligence and ongoing monitoring obligations. These industries/businesses are:&nbsp;•	Specific legal practitioners•	Gambling establishments•	Credit providers•	Boards of executors or trust companies•	Real estate agents•	Long-term life insurance companies•	Motor vehicle dealers•	Crypto asset dealers•	Krugerrand dealers<h2>What Are the New Legal Requirements Stipulated by FICA?</h2>Although these requirements may not apply to every business and should not be taken as direct legal advice concerning regulatory compliance with FICA, it does serve as an overview of what certain business can expect.&nbsp;•	Complete registration on the FIC's go-AML system via the FIC website no later than March 19, 2023.•	Appoint a compliance officer who is an employee or director of the accountable institution.•	Develop a risk management and compliance programme (RMCP) that complies with the requirements of section 42 of the FICA. The RMCP must be approved by senior management and/or the board of directors.•	Conduct a risk-based assessment of clients with whom the accountable institution conducts transactions or establishes a business relationship to verify their identification.For a complete overview of all the requirements, visit the official FICA website here.&nbsp;Because South Africa operates a Risk-Based Approach to its AML/CFT regulatory framework, different businesses will be subjected to different degrees of compliance. AIs are required to assess the risks associated with their clients and conduct customer due diligence accordingly. Ongoing customer due diligence must also be carried out for clients with whom the institution has established a business relationship. Additionally, the institution must keep records of all transactions with clients, in accordance with FICA regulations.Reporting to the FIC is also mandatory for AIs, including transactions that exceed the prescribed cash threshold, any suspicious or unusual transactions, and electronic fund transfers that exceed the prescribed threshold. They must also provide regular training on FICA requirements and the obligations of AIs.An AI that fails to comply with the FICA requirements such as registration with Financial Intelligence Center (FIC), reporting obligations, maintaining an RMCP, providing training, or proper record-keeping will be non-compliant with FICA provisions. As punishment, the FIC can impose administrative sanctions, including financial penalties not exceeding R10 million for individuals and R50 million for legal entities.<h2>Identity Verification, Customer Due Diligence and Risk Assessment Tools for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team here.&nbsp;

Understand how FICA may impact your regulatory compliance obligations and how you can remain FICA compliant.

New FICA Legislation Amendment – What Does it Mean for Your Business?

Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) legislation is a vital cornerstone of the global financial system that safeguards security and combats financial crime. International and national finance is regulated and scrutinized by watchdogs and specialist financial crime units that are empowered by national legislation to catch and prosecute perpetrators of financial crime. However, as criminal techniques get more advanced, difficult questions are posed: how can countries improve their legislation, what role can the private sector play, and why is South Africa being punished for its shortcomings in its AML/CFT legislation?&nbsp;<h2>What Makes a Strong AML/CFT System?&nbsp;</h2>AML/CFT stands for Anti-Money Laundering and Countering the Financing of Terrorism. The term Anti-Money Laundering (AML) encompasses the vast array of laws, regulations and policies that are created and implemented to combat money laundering and other associated types of financial crime.&nbsp;Ultimately, these laws aim to make it impossible to make use of any revenues gained from criminal activities. This is done by implementing practices to establish the genuine source of all funds in order to identify any linkages to illicit activities. &nbsp; To achieve this, a strong AML/CFT system will involve a great degree of checks related to identity verification and data validation. These may include:&nbsp;•	Know Your Customer (KYC) Protocols: A universal process of ensuring that an individual is really whom they claim to be.&nbsp;•	Enhanced Due Diligence (EDD): Heightened investigative protocols that are used for high-risk transactions or individuals. &nbsp;•	Politically Exposed Person (PEP) Checks: A check that establishes whether or not an individual is politically connected, due to the higher risk that these individuals represent.&nbsp;•	Ongoing Monitoring: The practice of continuously monitoring transactions and financial flows to detect suspicious activity.&nbsp;One of the most challenging aspects of AML/CFT legislation is the need to identify Beneficial Ownership structures. When identifying beneficial ownership, one is establishing exactly which individual benefits from the privileges associated with ownership of a legal entity. A beneficial owner will enjoy many privileges associated with ownership even though the title to the property in question is under someone else’s name. Establishing the beneficial ownership of an entity can be challenging.&nbsp;Beneficial Ownership structures can be designed to be highly convoluted and complex – either legally or illegally so – for several reasons. It should be noted that beneficial ownership structures are legal, so long as they are explicitly declared. When beneficial ownership structures are illegally constructed, they are most often done so for money laundering and tax evasion.&nbsp;Today, the majority of AML/CFT legislation is based upon the Risk-Based Approach (RBA). The RBA is an approach to AML/CFT legislation that adjusts the intensity of legislation depending on the risk level of a country, industry, or specific business. In other words, the RBA is an approach to AML/CFT law-making and regulation that adjusts the intensity of regulation according to the levels of risk that are present in specific circumstances, thereby allowing for the creation of an efficient and cost-effective AML/CFT system.&nbsp;Most importantly, a country’s AML/CFT legislation must be paired with high-quality law enforcement that has the capacity to enforce, investigate and prosecute. A comprehensive set of laws is useless without adequate enforcement.&nbsp; In the most basic terms, a strong AML/CFT system is one that can identify the genuine source of all financial flows, detect those that are illicit, and prosecute individuals and entities that are in breach of the law. &nbsp;<h2>How Are National and International AML/CFT Laws Enforced?&nbsp;</h2>Ultimately, a country’s AML/CFT laws are under its own control, and it is the responsibility of every nation to regulate its own AML/CFT legislation. The extent to which a country wants to implement and enforce the aforementioned due diligence checks in its financial system remains its decision.&nbsp;However, because the world has become increasingly interconnected and financial flows are internationally interwoven in a complex web, all economies impact one another. Weaknesses in one country’s AML/CFT system can negatively impact AML/CFT law enforcement in another country.&nbsp;Within this globalized context, all countries are subject to international standards for AML/CFT legislation – standards that are enforced by governments and organizations, most notable of which is the Financial Action Task Force (FATF).The FATF is the most influential global watchdog for AML/CFT legislation and is a leading intergovernmental organization founded to develop policies to combat money laundering. These policies are known as the FATF 40 Recommendations and are widely regarded as the global standard for anti-money laundering policy.&nbsp;Countries, therefore, cannot act however they wish without facing repercussions from other countries and global watchdogs. A pertinent example of this type of sanction is the FATF’s recent decision to greylist South Africa.&nbsp;<h2>Why South Africa Was Greylisted – A Weak and Undermined AML/CFT System &nbsp;</h2>South Africa was greylisted by the FATF on the 24th of February 2023. This decision came after a period of assessment by the FATF of South Africa’s AML/CFT system that concluded with the FATF stating that South Africa had serious shortfalls within its AML/CFT framework that needed to be urgently addressed. Ultimately, South Africa had failed to maintain an AML/CFT system that could sufficiently address the threat of economic crime to a degree that was in line with global standards.&nbsp;To read more about the impact of this decision by the FATF on South Africa’s economy, read our analysis here.&nbsp;It is critical to note that much of South Africa’s AML/CFT framework was badly undermined during the country’s period of State capture. Commenting on the FATF’s decision to greylist South Africa, the South African national treasury highlighted the work ahead to rebuild national institutions… <blockquote>“Government recognises that addressing the action items will be in the interest of South Africa, and that doing so is consistent with our existing commitment to rebuild the institutions that were weakened during the period of state capture, the effectiveness of which is essential to addressing crime and corruption.” – South African National Treasury.&nbsp;</blockquote>As the South African government works to re-establish the capacity of the state to effectively combat financial crime with a strong AML/CFT system and get itself removed from the FATF’s greylist, effective cooperation with private sector financial institutions will be important for success.&nbsp;<h2>What is the Role of Private Sector Businesses and Large Financial Institutions?&nbsp;</h2>Large financial institutions are generally expected to work with governments and international watchdogs to improve existing AML/CFT systems. For example, the Wolfsberg Group is an association of thirteen global banks dedicated to the development of frameworks and guidelines for the combatting of financial crime.&nbsp;Commenting on the work being done to get South Africa off the FATF’s greylist, South African President Cyril Ramaphosa highlighted the importance of cooperation between the government and private financial sector…&nbsp;<blockquote>“Partnerships between government and the financial sector have played a valuable role in efforts to address serious economic crimes. The South Africa Anti-Money Laundering Integrated Task Force was set up in 2019 as a partnership between the banking sector and government regulatory authorities.” – South African President Cyril Ramaphosa.&nbsp;</blockquote>Small and Medium Enterprises (SMEs), on the other hand, are generally only expected to comply with national AML/CFT legislation. In South Africa, this legislation is primarily governed by the Financial Intelligence Center Amendment Act (FICA).&nbsp;AML/CFT legislation safeguards our economy against devastating financial crime. Compliance with these laws helps to build a safer global system that boosts economic growth and drives greater prosperity by encouraging investment.&nbsp;<h2>Identity Verification, Data Validation and Risk Assessment Services for South Africa&nbsp;</h2>ThisIsMe is South Africa’s leading provider of digital tools for tasks like enhanced due diligence, KYC, customer due diligence, data validation and risk assessment. Committed to world-class standards for data handling and data privacy, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, contact our team here.&nbsp;

Understand what makes a world-class AML/CFT system and why South Africa has failed to do so.

How to Build a Strong AML/CFT System – What Has South Africa Done Wrong?

As business environments evolve and new risks emerge, companies must rapidly assess and mitigate risks. PwC’s 2022 Global Risk Survey contains valuable insights for the financial services industry that highlight the changing patterns of business and the evolving nature of threats. The banking and asset and wealth management industries are two sectors within this industry undergoing rapid rates of transformation, the process of which holds valuable insight into the manner of transformation. &nbsp; &nbsp;<h2>2023 and the Promise of Growth&nbsp;</h2>From a global perspective, the coming financial year represents a promise of strong growth for the financial services industry.Of all wealth and asset management respondents to PwC’s survey, 64% expected their business to grow, with 20% expecting growth of over 10% per anum. The top factors driving this growth are: new products are services (15%), new customer segments (13%), and strategic partnerships (11%). This comes on the back of record numbers for the wealth and asset management industry: wealth managers saw a record of USD 1.2 trillion in flows into investment accounts in 2021.&nbsp;The banking sector, meanwhile, also expects growth, with 76% of banks expecting to increase revenue. Driving this growth is the digitalization of products and services (17%), the launch of a new product or service (17%), and expansion into a new customer segment (14%).&nbsp;However, these prospects for growth go hand-in-hand with a rapidly evolving threat landscape that poses serious challenges to digital and financial security for both financial institutions and their customers.&nbsp;The financial services industry has been forced to address a number of rapidly evolving threats over the last several years. The evolving threat of external perpetrators of economic crime – manifested in the rise of customer fraud and platform fraud – has challenged the financial services industry to quickly assess and mitigate risks, all while operating in an unstable global context.&nbsp;These risks have been exacerbated by the process of digitalization that was driven forward by the Covid-19 pandemic. Digitalization now represents a key challenge – even risk – for financial sector industries.&nbsp;<h2>Overwhelming Rates of Change – The Challenge of Digitalization&nbsp;</h2>Wealth managers are reporting that 75% of firms are finding it especially challenging for their risk management functions to keep up with the speed of digital transformation. Firms report that external compliance pressures take up time and resources of risk functions and risk owners, as well as struggling with a lack of access to digital tools and enablers for risk management activities.&nbsp;The banking sector faces many of the same challenges. The need for investments in risk management technology is expected to increase as banks continue to gain scale. The speed of digital and other transformations is a significant or very significant challenge for risk management according to 79% of respondents. According to 74% of respondents, external and compliance pressures take up much of the time of risk functions and risk owners. Around 70% face time-consuming and costly manual risk processes, signaling a lack of access to digital tools for risk management.<blockquote>“The ability to utilise and interrogate data is a key tool in the arsenal to detect changes in the risk landscape. The survey shows that companies are investing: Three-quarters of executives are planning on increasing spending across data analytics, process automation and technology to support the detection and monitoring of risks.”</blockquote>In light of this new landscape, the banking and asset and wealth management sectors are increasingly looking to invest in process automation and new technology for risk assessment and risk management.&nbsp;<h2>The Rise of Risk Assessment – Greater Emphasis on Awareness and Mitigation&nbsp;</h2>Greater investment in technologies for risk assessment is a common trend throughout the financial services industry, but it is especially prevalent within the banking and asset and wealth management sectors.&nbsp;These trends are clear for banking respondents to PwC’ survey.&nbsp;•	41% of respondents in the banking industry expect to increase investments in risk management technologies by up to 10% in 2022, while another 24% of respondents expect to increase spending by more than 10%.&nbsp;•	79% will increase spending on the detection and monitoring of risks.&nbsp;•	74% will increase spending on workflow management.&nbsp;Similar trends manifest in the asset and wealth management industry.&nbsp;•	58% of firms plan to increase their spending on risk management tech, of which 73% of respondents report that all of this investment will be into technology and digital capabilities.&nbsp;•	37% are spending more on third-party risk management,•	36% are investing more in KYC processes.&nbsp;Commenting on the drive for risk assessment tools, PwC recommends that businesses in the financial services industry investigate partnerships with third parties.&nbsp;<blockquote>“Find opportunities to outsource noncore competencies to third parties whenever possible, you won’t be able to keep all the skills you need in-house and respond quickly and appropriately to new risks.”</blockquote><h2>Process Automation – Tools for Cost-Saving, Efficiency and Security&nbsp;</h2>A common trend across the financial services industry is the increasing drive for process automation. The rapid development of process automation technologies has proven immensely beneficial for the financial services industry and still holds immense promise for the advancement of risk assessment and mitigation systems. PwC notes this, commenting that…<blockquote>“Close behind are process automation technologies that help with the detection and monitoring of risks, and workflow management. These tech investments should help address two of the top challenges in managing risks in banks: lack of access to digital tools and time-consuming, costly, manual risk processes.”&nbsp;</blockquote>Recognizing the value of process automation technologies, investment in developing these capacities is a key objective for the banking and asset and wealth management sectors. 32% of asset and wealth management firms report wanting to increase process automation, while in the banking sector, 78% of respondents will increase spending on process automation.&nbsp;Notably, digital technologies now enable the automation of high-quality security protocols such as KYC checks and data validation procedures, saving time and money in the process. &nbsp;Commenting on the evolving demands placed upon the financial services industry by customers, PwC notes the increasingly invaluable role played by the FinTech industry…&nbsp;<blockquote>“Banks are aiming to produce smooth onboarding and service across channels, for customer and employees alike… Cloud and FinTech partnerships are becoming essential parts of the delivery strategy and experience.”</blockquote>ThisIsMe provides leading automated digital onboarding solutions that ensure the highest levels of regulatory compliance and security while also providing a world-class customer experience. To find out how we can equip your business with the tools it needs, contact our team here.&nbsp;<h2>Automated Digital Onboarding, Risk Assessment and KYC Services for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business, book a demonstration by contacting our team here.&nbsp;

With new insights from PwC's 2022 Global Risk Survey, understand how tech is helping the financial services industry to overcome novel challenges.

How Tech is Helping Financial Services Industry Mitigate 2023’s Top Risks

The rapid rate of digitalization that defined business practice during the Covid-19 pandemic opened new opportunities for criminals to exploit vulnerabilities and defraud companies, leading to a shocking rise in a new form of economic crime: platform fraud. PwC’s 2022 Global Economic Crime and Fraud Survey sheds light on the trends of platform fraud and allows businesses to understand what risks they may be exposing themselves to, thereby empowering businesses to create effective risk mitigation strategies built around the use of digital tools for identity verification and data validation.
<h2>What is Platform Fraud and Why is it a Threat?</h2>
Platform fraud can very simply be defined as fraud that is committed on a digital platform, such as a social media platform, a contactless payment platform, or a remote work platform. In the financial services industry, platform fraud was included under the broad category of “financial crime”, but the rapid growth of platform fraud has led PwC to define it under its own standalone category.&nbsp;
In a very short amount of time, platform fraud has grown to represent a significant portion of the total reported incidents of economic crime recorded in PwC’s survey. Of the surveyed companies, 39% of the reported incidents of economic crime were platform fraud. Furthermore, of these respondents, 51% reported having fallen victim to platform fraud, which is a four percentage-point increase compared to 2020’s statistics and marks the highest incidence rate in 20 years of PwC’s bi-annual reporting on economic crime.&nbsp;
<h2>The Rise of Organised Crime – New Perpetrators Bring Greater Challenges&nbsp;</h2>
A worrying trend in the financial crime landscape has been the entrance and rapid proliferation of organised crime networks. Compared to the nature of financial crime before the Covid-19 pandemic, the post-pandemic threat landscape has seen various forms of economic crime become organised and professional – platform fraud is no exception.&nbsp;
<blockquote>
“Platform fraud has become a criminal enterprise – reinforcing the imperative for organisational resilience and the right tools to reduce your risk.”</blockquote>
As of 2022, organised crime was responsible for committing 28% of all incidents, making it the greatest perpetrator of platform fraud. Attacks that are conducted by organised criminal groups are also more advanced and typically lead to significantly higher financial losses compared to attacks not conducted by organised criminal groups. Furthermore, the dominance of organised crime in platform fraud has been lightning fast: prior to 2020 and the Covid-19 pandemic, organised crime played a negligible role in the proliferation of platform fraud.&nbsp;
After organised crime, the second greatest perpetrator of platform fraud are customers, who account for 25% of all incidents.&nbsp;
The third greatest perpetrators of platform fraud are vendors, who account for 19% of all incidents.&nbsp;
<h2>Who Are the Victims? Large Financial Institutions (FIs) vs Small and Medium Enterprises (SMEs)</h2>
When ranked by the number of instances in which they featured in incidents of platform fraud, the industries most affected by platform fraud are:
<ol>
<li>Technology, Media and Communications (TMC): 62% &nbsp;</li>
<li>Financial Services (FI): 58% &nbsp;</li>
<li>Health: 49%&nbsp;</li>
<li>Retail and Consumer: 48%&nbsp;</li>
<li>Government and Public Services: 46%&nbsp;</li>
</ol>
This ranking reflects the general trends of victimisation that hold true for other specific types of externally perpetrated economic crime, such as customer fraud and business partner fraud. Larger, more technologically reliant industries with immense revenues have and will likely remain the greatest victims of economic crime, at least when ranked by incidence rate.
<h2>Technology, Media and Communications and Financial Services – Forever Targeted, yet Experienced and Well Resourced &nbsp;</h2>
The financial services (FI) industry maintains some of the highest exposure to fraud risk of all industries across the world. The FI industry consistently ranks near or at the top of all measurements of financial crime, both for incidence rates and associated financial losses. Furthermore, outside of the FI industry, financial platforms within other industries remain the greatest target for platform fraud.&nbsp;
<blockquote>
“Almost half of all fraud cases take place on financial platforms – the most vulnerable model, particularly those involving funds transfers. But financial impact is just the beginning. Brand damage can be devastating. The undoing of customer loyalty and trust – catastrophic.”</blockquote>
However, although the TMC and FI industries are generally far more experienced in dealing with risks associated with economic crime, the industry nevertheless remains at high risk of attack – a fact demonstrated by the reality that perpetrators continue to successfully carry out attacks despite advanced security measures.&nbsp;
<blockquote>
“Perpetrators have become more sophisticated. The stakes are high. But still, our survey shows too many business leaders, both providers and users, aren’t fully aware of their exposure.”</blockquote>
The TMC and FI industries must leverage their experience and immense resources to <a href="https://thisisme.com/resources/risk-assessment" target="_blank">identify and mitigate risks</a>. Not all industries have the same degree of expertise and capital that can be leveraged to their advantage.&nbsp;
<h2>Under Threat – The Heightened Risk Exposure to New Entrants and SMEs</h2>
In their report, PwC made an important note of the fact that the level of risk posed by platform fraud will arguably be substantially higher for SMEs and new entrants into the world of digital platforms.&nbsp;
<blockquote>
“Well-established platform players have likely long been equipped with the proper security and controls to manage risk. But for newer entrants to the platform environment, there is dangerous potential for mushrooming risk.”</blockquote>
Not only do SMEs and new entrants likely have far less experience in mitigating digital risks – such as those posed by platform fraud – but they also stand to lose far more in the event of an attack. SMEs and new entrants typically have substantially less capital that can be used to absorb losses in an incident of platform fraud. In this context, the comprehensive identification of weaknesses and exposure to risks – coupled with their active mitigation – is crucial in order to avoid potentially devastating losses. &nbsp;
<h2>Tools for Risk Mitigation – Identity Verification and Data Validation Services for South Africa&nbsp;</h2>
The changing economic crime threat landscape calls for a detailed analysis of risks and the rapid adoption of digital tools that empower businesses to secure their perimeters and mitigate the risks of economic crime.&nbsp;
As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

As new forms of economic crime emerge – such as platform fraud – industries need to quickly understand new threats and learn how to mitigate them.

Top 5 Industries Most Exposed to the Risk of Platform Fraud - Analysis

Today, consumers expect more. Heightened public scrutiny of companies has seen a far higher value be placed on high-quality corporate reputations and public trust. Accordingly, as reputations become increasingly valuable, so the threat of reputational damage and a loss of trust has increasingly come into the spotlight – deservedly so, for damaged public trust has proven an existential issue for several large global companies. In this context, we examine the value of enhanced due diligence tools like adverse media checks to ensure that businesses are empowered to take a proactive approach to mitigate risks by knowing exactly whom they are doing business with.What is Reputational Risk and Why Is It So Crucial?&nbsp; To understand reputational risks, one first needs to understand reputation.&nbsp;Broadly, a company’s reputation is the collective thoughts and feelings of stakeholders that have been created over time as the result of that company’s decisions and behaviours. As a major driver of growth and sustained, long-term value, it is one of a company’s greatest assets.1 &nbsp;Accordingly, the concept of reputational risk can be understood as events that undermine public trust in a company’s products or brand.&nbsp;The value of reputation cannot be understated: a company’s reputation is estimated to account for a quarter of its market value.2 Accordingly, damage to reputation can be devastating and the importance of assessing and mitigating reputational risks has grown exponentially over the last decade.&nbsp;Today, companies understand that reputational risks pose some of the greatest threats to a company’s success and profitability. According to a publication by Deloitte, 73% of surveyed board members identified reputational risk as the area where they felt their company was most vulnerable. Furthermore, as noted by PwC…<blockquote>“The executives we surveyed consistently ranked reputational harm at or near the top of negative impacts from various forms of economic crime, with public perception (reputation/brand strength, business relations and share price) taking the hardest hit – a level of impact that has increased since 2016.” – PwC.3 &nbsp;</blockquote>This concern from C-Suite executives is warranted. In today’s economy, a significant majority of a company’s value comes from hard-to-assess intangible assets such as brand equity, intellectual capital and goodwill – more than ever, companies are vulnerable to anything that damages their reputations.4 &nbsp;<h2>The Value of Knowing Whom You Do Business With</h2>In the context of <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification</a> and <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">due diligence</a>, knowing exactly whom you do business with is crucial for the management of reputational risks.&nbsp;Whom a company surrounds itself with is central to its reputation. A network of trusted, reputable and well-liked clients and business partners will likely boost a company’s reputation. Conversely, association with even one business partner or client with a sufficiently negative reputation can damage or even destroy a company’s reputation.&nbsp;<blockquote>“It takes many good deeds to build a good reputation, and only one bad one to lose it.” - Benjamin Franklin.&nbsp;</blockquote>Businesses cannot afford to overlook the significant risks posed by clients and business partners – being dragged into a public scandal because of your business’s association with a problematic client or business partner can instantly undo years of hard work and cost millions to recover from.&nbsp;Public trust and reputation are fragile. In a survey by Deloitte, 85% of respondents were very or fairly likely to sever an existing relationship with an organization if it did something that negatively impacted trust.5 Consumers also relate to the value of trust, even in a corporate setting, in a human way, describing the loss of trust in terms such as betrayal, disappointment and anger.6 &nbsp;Damage to reputation and the public’s trust in a company can pose an existential threat to a company.&nbsp;To study the financial impact of damage to trust, Deloitte looked at three different companies that had been embroiled in scandals, all of whom had a market cap of over $10 billion. The scale and scope of all three scandals were trust related. Over the course of their respective scandals, the three companies lost between 20-56% of their market cap over a period of between three months and two years. The combined total value of this loss was approximately $70 billion. The value they lost in relation to their peers was even more severe, with the three companies falling behind their respective industry indexes by 26-74%.7 &nbsp;In this changing global context that is seeing a heightened demand for trust, businesses cannot afford to overlook the risk posed by doing business with clients who pose a reputational threat to the business. Knowing whom you do business with is more important than ever.&nbsp;<h2>Tools for Risk Assessment – The Value of Adverse Media Checks and Enhanced Due Diligence (EDD)</h2>Tools for enhanced due diligence – <a href="https://thisisme.com/resources/Adverse-Media" target="_blank">adverse media checks</a>, <a href="https://thisisme.com/resources/politically-exposed-person" target="_blank">politically exposed person checks</a> and <a href="https://thisisme.com/resources/sanctions" target="_blank">sanction checks</a> – are so valuable because they empower companies to make informed decisions that enable a proactive approach to risk mitigation.<blockquote>“[Companies] tend to focus their energies on handling the threats to their reputations that have already surfaced. This is not risk management; it is crisis management—a reactive approach whose purpose is to limit the damage.” – Harvard Business Review.8&nbsp;</blockquote>Now more than ever, proactive approaches to risk management are vital because reactive approaches are nearly impossible to get right; once they have broken, scandals are nearly always out of a company’s hands.&nbsp;<blockquote>“The existence of social media platforms that facilitate the extremely rapid spread of information (both real and fake) means that the publicity from an incident may often prove uncontrollable, even with the swiftest responses. Preventing these incidents from ever happening in the first place is increasingly becoming the only way forward.” – PwC.9&nbsp;</blockquote>By using enhanced due diligence tools to know exactly who your client or business partner is, a business can ensure that it does not make any decision that exposes it to an undue level of risk. For example, an adverse media check on a client is a small step that can instantly help to vet a client’s surface-level reputation and reveal any prior public scandals by screening the internet for news stories of that client.Naturally, demands for <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessment</a> will vary; wealthy, influential and politically exposed clients will warrant a far higher level of due diligence than a singular user. Certain clients, such as <a href="https://thisisme.com/resources/high-net-worth-individuals" target="_blank">High-Net-Worth-Individuals (HNWIs)</a> will warrant more intensive due diligence checks that include Politically Exposed Person (PEP) checks and sanction checks.&nbsp;Today, public scandals are more likely than ever to spiral out of the company’s control. Damage to reputation can cost a company millions and destroy years of progress. Given the stakes, a proactive approach to reputational risk mitigation is crucial. Using digital tools that empower your business to make informed decisions is more important than ever. &nbsp;<h2>Adverse Media Checks and Enhanced Due Diligence Solutions for South Africa&nbsp;</h2>As South Africa’s leading provider of due diligence and remote onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced solutions for identity verification, information validation and risk assessment can empower your business, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>. <ol><li>Deloitte Risk Advisory. 2016. Reputation Matters: Developing Reputational Resilience Ahead of Your Crisis.</li><li>Deloitte Risk Advisory. 2016. Reputation Matters: Developing Reputational Resilience Ahead of Your Crisis.</li><li>Global Economic Crime and Fraud Survey. 2018.PwC.&nbsp;</li><li>Harvard Business Review. 2007. Reputation and Its Risks.&nbsp;</li><li>Deloitte. Chemistry of Trust, Part 1. 2020.&nbsp;</li><li>Deloitte. Chemistry of Trust, Part 2. 2020.&nbsp;</li><li>Deloitte. Chemistry of Trust, Part 1. 2020.&nbsp;</li><li>Harvard Business Review. 2007. Reputation and Its Risks.</li><li>PwC.&nbsp;<meta charset="UTF-8">Global Economic Crime and Fraud Survey. 2018.&nbsp; <meta charset="UTF-8"> <meta charset="UTF-8"> <meta charset="UTF-8"> <meta charset="UTF-8"> <meta charset="UTF-8"> </li></ol>

Understand how EDD tools like adverse media checks empower companies to make informed decisions and avoid critical reputational damage.

Reputational Risk: The Importance of Adverse Media Checks and EDD

The nature of fraud and economic crime is constantly changing. As the Covid-19 pandemic shook the world and forced economies to rapidly adapt, criminals took advantage of the chaos and found new ways to exploit weaknesses and defraud victims – often of millions of dollars – thus driving the rise of a new and devastating form of economic crime: platform fraud.&nbsp;<h2>What is Platform Fraud?&nbsp;</h2>Platform fraud can very simply be defined as fraud that is committed on a digital platform, such as a social media platform, a contactless payment platform, or a remote work platform. In the financial services industry, platform fraud was included under the broad category of “financial crime”, but the rapid growth of platform fraud has led PwC to define it under its own standalone category.&nbsp;PwC has recently published its 2022 Economic Crime and Fraud Survey report. The newest in a long line of bi-annual reports, the 2022 edition sheds light on the changing nature of economic crime and helps businesses to understand the new threats they face and how to mitigate them. The report notes that…<blockquote>“Platform fraud isn’t new… but as the prominence and scale of platforms have grown and the means, speed and method of payments have changed, risk has dramatically increased.”</blockquote>According to PwC, platform fraud has seen a rapid increase in its incidence rate due to the combination of factors that includes the fast-paced digitalisation of commerce, socialisation and work that was driven by the Covid-19 pandemic and saw the use of online platforms explode at an unprecedented rate across the globe. This fast-paced digitalization and shift to digital platforms created new opportunities for criminals to exploit weaknesses and commit fraud.&nbsp;The rise of platform fraud has been significant. Of the surveyed companies, 39% of the reported incidents of economic crime were platform fraud. Furthermore, of these respondents, 51% reported having fallen victim to platform fraud, which is a four percentage-point increase compared to 2020’s statistics and marks the highest incidence rate in 20 years of PwC’s reporting on economic crime.&nbsp;<h2>How is Platform Fraud Committed – Understanding Weaknesses and Identifying Trends&nbsp;</h2>Analysis of data for platform fraud reveals clear weaknesses and trends that can be used to better protect external business perimeters. The first such data relates to the methods by which platform fraud is executed. The three most common methods of execution include:&nbsp;<ol><li>Identity Theft/Account Takeover: 40%&nbsp;</li><li>Device Theft or Cloning: 24%&nbsp;</li><li>Synthetic ID: 21%&nbsp;</li></ol>These statistics make a strong case for the stringent and widespread adoption of reliable digital tools capable of verifying the legitimacy of users on digital platforms – tools for identity and device verification will likely prove vital in the fight against platform fraud.&nbsp;Once fraudsters gained access to a platform, there were four dominant types of fraudulent transfers that took place. These are:<ul><li>Unauthorised Fraudulent Transactions (e.g., card, digital): 37%&nbsp;</li><li>Victim Initiated Fraudulent Transactions (e.g., scams): 31%&nbsp;</li><li>Unauthorised Transfer/Removal of Data: 26%&nbsp;</li><li>Transaction Laundering: 25%&nbsp;</li></ul>The type/category of platforms victimised by platform fraud is also notable. Of the respondents to PwC’s survey who had experienced platform fraud, 91% of surveyed organizations had experienced platform fraud on one or more of the following platforms over the last 24 months:&nbsp;<ul><li>Financial&nbsp;</li><li>Enterprise&nbsp;</li><li>Social Media&nbsp;</li><li>Knowledge&nbsp;</li><li>Media Sharing&nbsp;</li><li>Goods</li><li>Services&nbsp;</li></ul>The identification and analysis of this data will help companies to identify weaknesses and predict trends, thereby empowering companies to create tailored<a href="https://thisisme.com/resources/risk-assessment" target="_blank"> risk mitigation</a> strategies that will help organizations across the world to address the growing threat of platform fraud.<h2>How to Mitigate Risk – Solutions for Identity Verification and Information Validation&nbsp;</h2>In the conclusion to their 2022 Global Economic Crime and Fraud Survey, PwC notes that…&nbsp;<blockquote>“…the answer may lie in technology. Respondents to our 2022 survey reveal a number of solutions they’re using to combat platform fraud, from document verification and validation to anomaly detection.”</blockquote>Technology is the most powerful tool at the disposal of businesses that can be used to combat new digital threats like platform fraud. Previous novel threats – such as the explosion of customer fraud – posed similar challenges to business.&nbsp;Nevertheless, customer fraud was a form of financial crime for which “dedicated resources, robust processes and technology have proven effective in prevention”.1 &nbsp;The same will likely prove true of platform fraud: the integration of digital tools, coupled with a greater corporate awareness of the external threats facing a business’s perimeters, will lead to a notable reduction in both the incidence rates and associated financial losses from platform fraud.&nbsp;Today, these tools are more reliable, cost-effective, and easier to integrate into existing digital systems than ever before. Although new challenges like platform fraud pose worrying risks to businesses, the tools that can be used to mitigate these risks are more accessible than ever.<h2>Secure Your Business Today – Data Validation and Identity Verification Services for South Africa&nbsp;</h2><meta charset="UTF-8">As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced solutions for identity verification, information validation and risk assessment can empower your business, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp; <ol><li>PwC. Global Economic Crime and Fraud Survey. 2020.&nbsp;</li></ol>

Understand the risk of platform fraud and how tools for identity verification, data validation and risk assessment can help to protect your business.

What is Platform Fraud - How to Guard Against a Serious, Growing Threat

After the FATF released its mutual evaluation report on South Africa’s AML/CFT legislation one year ago, the country has failed to sufficiently address the FATF’s concerns. As a result, South Africa now risks being greylisted by the FATF – a decision that has the potential to greatly affect how financial institutions across the world are obligated to conduct business in the country.&nbsp;<h2>What is the FATF</h2>The Financial Action Task Force is a leading intergovernmental organization founded to develop policies to combat money laundering. These policies are known as the <a href="https://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html" target="_blank">FATF 40 Recommendations</a> and are widely regarded as the global standard for anti-money laundering policy.&nbsp;South Africa has been a FATF member since 2003. Recently, in October 2021, the FATF released its <a href="https://www.fatf-gafi.org/countries/s-t/southafrica/documents/mer-south-africa-2021.html" target="_blank">Mutual Evaluation Report</a>. The report evaluated South Africa’s AML/CFT practices, analyzed South Africa’s compliance with the FATF 40 Recommendations, criticized shortcomings and inconstancies, and provided valuable recommendations regarding how the country’s current systems can be strengthened.&nbsp;<h2>What is Greylisting?</h2>When a country is greylisted by the FATF, that country is subjected to increased monitoring of its anti-money laundering and countering the financing of terrorism system. This is done to account for the increased risk of money laundering posed by that country, most often due to notable deficiencies in the design and/or application of its <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT regulatory framework</a>.&nbsp;The FATF describes increased monitoring and greylisting as the following:&nbsp;<blockquote>“Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. This list is often externally referred to as the greylist.” – FATF.</blockquote>The FATF maintains a list of countries that are greylisted, which can be found <a href="https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/increased-monitoring-october-2022.html" target="_blank">here</a>. Should South Africa be placed on this list, the country will appear alongside other greylisted jurisdictions that include Syria, Cambodia, Mali, South Sudan and Yemen. As a comparatively strong African economy with a mature financial system, South Africa will be an abnormal candidate for a greylisted status.&nbsp;<h2>Why South Africa Might be Greylisted&nbsp;</h2>As a global watchdog for money laundering and the financing of terrorism, the FATF routinely assesses the AML/CFT policies of countries around the world. Countries periodically undergo enhanced assessments conducted by the FATF, after which the FATF releases a Mutual Evaluation Report (MER) that covers the findings and recommendations for the AML/CFT legislation of a particular jurisdiction, such as South Africa.&nbsp;One year ago, the FATF released its MER on South Africa. This MER report assessed South Africa’s AML/CFT legislation and highlighted several key deficiencies that needed to be urgently addressed in order for South Africa to avoid being greylisted. The majority of these shortcomings and strategic deficiencies were related to the State Capture saga that saw institutionalized corruption severely undermine South Africa’s criminal justice system and cripple the economy.&nbsp;The FATF gave South Africa one year in which to demonstrate that the country was making a concerted effort to address these deficiencies, during which time the FATF placed South Africa under increased monitoring to assess its progress.&nbsp;Now, more than one year after the start of the period of increased monitoring, South Africa has largely failed to show the FATF that it has taken the recommendations seriously and made concerted efforts to address the dire shortcomings in its AML/CFT system.&nbsp;As a result, analysts predict that there is an 85% chance that the FATF will greylist South Africa near the start of 2023.&nbsp;<h2>Impact of Greylisting on Businesses and Financial Institutions&nbsp;</h2>Intellidex has released a <a href="https://hub.blsa.org.za/wp-content/uploads/2022/10/BLSA-FATF-Intellidex-Report.pdf" target="_blank">report</a> evaluating South Africa’s chances of being greylisted and the potential fallout from such an outcome. As noted by Intellidex, one of the most significant effects of South Africa being greylisted will be increased transactional costs associated with requirements for greater due diligence.&nbsp;<blockquote>“The primary economic impact will arise from increased transaction costs related to enhanced due diligence applied to most South Africans’ client relationships with foreign service providers. This will increase the cost of capital and generally reduce overall foreign investment in South Africa. There will also be greater costs in the primary issuance of debt and equity particularly to international investors stemming from reputational effects and due diligence costs by book builders.” – Intellidex.&nbsp;</blockquote>The new requirements for <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">enhanced due diligence</a> will most badly affect South African banks, who will be obligated to report on AML/CFT risks on an annual basis instead of every three years, while senior management will have to directly report to clients. These costs will be felt most badly by South African businesses and individuals that trade internationally and have bank accounts or investment accounts abroad. Costs will increase particularly for South African banks concerning the management of correspondence, banking relationships and relationships with global infrastructure providers such as payment systems.&nbsp;Furthermore, according to Intellidex, capital markets will not be significantly affected in the short run as there are no automatic reactions to a greylisted status and operators are already cognisant of the risks associated with South Africa. However, ESG funds that use greylisting as a proxy for governance will likely down-weigh South African exposure. &nbsp;<h2>Impact of Greylisting on South Africa’s Economy&nbsp;</h2>The heightened requirements for due diligence have the potential to severely undermine and stifle South African economic growth. For instance, heightened transactional costs may lead to a withdrawal of some businesses from South Africa due to declining profitability caused by increased transactional costs.&nbsp;Furthermore, some institutions may choose to de-risk their portfolios by terminating business with South African clients, as well as opting to not start any new business dealings within South Africa or with South African clients.&nbsp;Effects such as these have the potential to severely undermine South Africa’s economic growth.&nbsp;At its worst, greylisting could wipe out up to 3% of SA’s GDP; in the best-case scenario, these estimates are less than 1% of GDP. &nbsp;Nonetheless, the FATF has yet to announce its decision as to whether or not South Africa will be greylisted. Even if South Africa is greylisted, the severity of the greylisting will depend on how seriously South Africa addressed the FATF’s concerns – a serious investment of political, social and economic capital into addressing the FATF’s concerns can mean that SA’s period of being greylisted will be short-lived, whereas perceived inactivity will heighten the losses associated with a greylisted status.&nbsp;Accordingly, should South Africa be greylisted, the exact effects of such a decision remain to be seen and depend on South Africa’s commitment to addressing the FATF’s concerns as quickly and comprehensively as possible.&nbsp;<h2>AML/CFT Compliance Solutions for South Africa&nbsp;</h2>Although there are universally recognized guidelines for AML/CFT regulations, every country typically has their own set of regulatory requirements that govern how businesses, institutions and organizations in that specific country must conduct business with their customers.&nbsp;When doing business in a country and ensuring compliance with its complex financial regulations, it is important to employ experts in the relevant country who are best equipped to operate within the nexus of legislation, law enforcement and economic realities while delivering high-quality and cost-effective services. &nbsp;<h2>Enhanced Due Diligence, Risk Assessment and Identity Verification Services for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

How the risk of South Africa being greylisted by the FATF will affect AML/CFT regulatory compliance obligations within and outside the country

Greylisting - Impact on SA's Enhanced Due Diligence Compliance Obligations

South Africa has become well-known for the country’s high rates of corruption and infamous State Capture saga, both of which have undermined the country’s AML/CFT legislation and dirtied its economy. Understanding how the proximity to political power influences the risk of corruption – as well as grasping how businesses can mitigate this risk – are both key to the adoption of effective AML/CFT legislation that can facilitate the creation of a clean and legitimate economy for South Africa.&nbsp;<h2>South Africa’s High Rates of Corruption and Economic Crime&nbsp;</h2>Historically, South Africa has ranked as a country with one of the highest rates of economic crime in the world. Since 2009, the country’s incidence rate has been an average of 27 percentage points higher than the global average, while in 2020 the country was tied with China for the country with the highest reported incident rate of economic crime.&nbsp;Furthermore, South Africa is also renounced for its high levels of corruption. According to Transparency International, a score below 50 out of 100 indicates a significant corruption problem. South Africa scored 44.&nbsp;These findings are echoed by Corruption Watch, the South African non-profit organization dedicated to the fight against corruption. Commenting on Transparency International’s ratings of South Africa, Corruption Watch notes that…<blockquote>“South Africa scored an embarrassing 44 in 2021 and a decade earlier it managed 43. This year’s score is the same as in 2020 and 2019. In 2018 and 2017 it scored 43 and before that, it managed 45 (2016), 44 (2015), 42 (2013)and 43 (2012).” – Corruption Watch, 2022.</blockquote>In their annual report for 2022, Corruption Watch draws attention to the threat of corruption and <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">money laundering</a> that is posed by <a href="https://thisisme.com/resources/politically-exposed-person" target="_blank">Politically Exposed Persons (PEPs)</a>. Of all the reports of corruption received by Corruption Watch, 67% related to corruption by public officials…<blockquote>“The bulk of the reports (67%) relate to corruption or other forms of misconduct in the public sector – this includes the national government (28%), provincial government (8%), local government (24%), and state-owned entities (3%), among others.”</blockquote>Clearly, proximity to political power in entails a high risk of corruption – confirmation of the logic that underpins the basis for <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT legislation</a> that requires <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">enhanced due diligence</a> to be carried out on individuals that are exposed to political power. Few case studies provide better evidence for this than South Africa’s State Capture saga.&nbsp;<h2>South Africa’s Legacy of State Capture and Institutionalized Corruption&nbsp;</h2>The pervasive rot of public sector corruption in South Africa is well documented. The extent to which State Capture undermined the judicial system and decayed the legitimacy of South Africa’s democracy through the disregard for law and morality is getting clearer as investigations shed light on the state of governance in South Africa.&nbsp;These issues were highlighted as serious concerns by the FATF in the organizations’ Mutual Evaluation Report of South Africa. As noted by the FATF…<blockquote>“South Africa has suffered from a sustained period of “State capture”, which helped to generate substantial corruption proceeds and undermined key agencies with roles to combat such activity</blockquote>The FATF’s MER report on South Africa clearly outlined a variety of severe issues that the country had nevertheless failed to address, one of which was the failure to pursue the prosecution of corruption and money laundering cases associated with State Capture…<blockquote>“In particular, money laundering cases relating to “State Capture” have not been sufficiently pursued.”</blockquote>Nevertheless, much damage has already been done with not enough effort made to recover from it. One year since the MER report was released, South Africa has still failed to address the FATF’s concerns and now <a href="https://thisisme.com/insights/SAs-Road-to-Greylisting-An-AML-CFT-Regulatory-Compliance-Timeline" target="_blank">faces the risk of being greylisted</a> – a decision that has the potential to undermine economic growth by raising transaction costs as international financial institutions are forced to consider South Africa as a high-risk jurisdiction and implement the appropriate controls.&nbsp;<h2>How PEP Checks Can Help Mitigate the Risk of Corruption&nbsp;</h2>Broadly, the concept of a Politically Exposed Person (PEP) refers to individuals who currently hold or have held political power. Due to the interwoven nature of politics and private capital, governments and financial institutions worldwide agree that PEPs represent an increased money-laundering risk. This is because individuals who hold political power can abuse their power to engage in money laundering and other financial crimes like corruption, bribery, embezzlement and the <a href="https://thisisme.com/resources/countering-the-financing-of-terrorism" target="_blank">financing of terrorism</a>.&nbsp;To account for this risk, national regulators ensure that PEPs are subjected to <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">Enhanced Due Diligence (EDD)</a> procedures designed to scrutinize the connections between a PEP’s political power and their financial transactions.&nbsp;A PEP check is a tool for identity verification that will confirm whether or not an individual is politically exposed and are designed to help businesses assess the risk of individuals and, if they are identified as a PEP, take the necessary measures to mitigate risk and ensure continued regulatory compliance.&nbsp;Countries and regions with high rates of corruption represent a higher risk of money laundering because corrupt individuals will most often have to launder their illicit funds in order to “clean” it and have it legitimised for use and expenditure in the national economy.<h2>How to Ensure Regulatory AML/CFT Compliance with PEP Checks and Enhanced Due Diligence&nbsp;</h2>South Africa has strict <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT legislation</a> designed to combat money laundering and the financing of terrorism – a task done by requiring accountable institutions to conduct identity verification and risk assessment practices that enable the identification of high-risk individuals, who can then be treated accordingly.&nbsp;It is essential for businesses to ensure the proper use of sanction checks and PEP checks; a failure to do so not only exposes a business to immensely heightened risk but also puts the business in jeopardy of being convicted of regulatory non-compliance.&nbsp;Failure to comply with these laws can lead to serious punishments being handed down by the national regulator – fines and even prison time for implicated entities and individuals are possible.&nbsp; Nevertheless, it may also be in a business’s best interests to mitigate risks with due diligence tools above and beyond what is required by law. By using tools for identity verification and data validation, businesses empower themselves to better assess and mitigate risk. In an economy where incidents of economic crime are high and falling victim to one often carries high economic and reputational costs, a business may be well advised to be proactive in <a href="https://thisisme.com/resources/risk-assessment" target="_blank">assessing and mitigating risks</a>.&nbsp;<h2>Enhanced Due Diligence Services and PEP Checks for South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our suite of identity verification, data validation and risk assessment services can enhance business while providing a world-class customer experience, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

How the threats of corruption and economic crime can be addressed with PEP checks, Enhanced Due Diligence, KYC and identity verification services

Corruption in South Africa - The Risk of Politically Exposed Persons (PEPs)

After years of corruption and a deficient AML/CFT system, South Africa faces the risk of being greylisted for its failure to properly comply with the FATF’s 40 Recommendations. In light of this possibility, this article explains the role of the FATF and what South Africa did wrong to face an 85% chance of being greylisted.&nbsp;<h2>What is the FATF?</h2>The Financial Action Task Force (FATF) is a leading intergovernmental organization founded to develop policies to combat money laundering. These policies are known as the <a href="https://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html" target="_blank">FATF 40 Recommendations</a> and are widely regarded as the global standard for <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">anti-money laundering</a> policy.Due to its well-respected status and global presence, the FATF wields a significant amount of hard and soft political and economic power thanks to its capacity to sanction countries, businesses and individuals.&nbsp;Much of the FATF’s power stems from the fact that the organization’s white, grey and black lists are used by many countries, watchdogs and institutions as accurate indicators of risk. This means that when the FATF assigns a certain country a designation – such as Iran’s blacklisted status – global capital flows will have to adjust their risk management protocols accordingly. When this happens, the sanctioned country can incur significant damage to its economy. &nbsp;Now, South Africa is at high risk of being greylisted by the FATF.&nbsp;<h2>What is Greylisting?</h2>When a country is greylisted by the FATF, that country is subjected to increased monitoring of its anti-money laundering and countering the financing of terrorism system. This is done to account for the increased risk of money laundering posed by that country, most often due to notable deficiencies in the design and/or application of its AML/CFT regulatory framework.&nbsp;The FATF describes increased monitoring and greylisting as the following:&nbsp;<blockquote>“Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. This list is often externally referred to as the greylist.” – FATF.</blockquote>The FATF maintains a list of countries that are greylisted, which can be found here. Should South Africa be placed on this list, the country will appear alongside other greylisted jurisdictions that include Syria, Cambodia, Mali, South Sudan and Yemen. As a comparatively strong African economy with a mature financial system, South Africa will be an abnormal candidate for a greylisted status.&nbsp;<h2>2019: FATF Begins Peer Review of South Africa’s AML/CFT System and Legislation&nbsp;</h2>In 2019, the FATF began a two-year period of enhanced peer review, during which time the organization investigated and assessed the design, implementation and overall competency of South Africa’s anti-money laundering and combatting the financing of terrorism <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">(AML/CFT) system</a>.&nbsp;<h2>October 2021: FATF Releases Mutual Evaluation Report on South Africa&nbsp;</h2>In October 2021, the FATF released its Mutual Evaluation Report. The findings of the report were worrisome. The MER report evaluated South Africa’s AML/CFT practices, analyzed South Africa’s compliance with the FATF 40 Recommendations and criticized shortcomings and inconstancies.&nbsp;The report also provided valuable recommendations regarding how the country’s current systems can be strengthened. The report particularly criticized South Africa’s inconsistencies in its requirements for businesses to monitor the threat of <a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">money laundering</a> and report findings to the regulator. Some high-risk business sectors were found to scarcely report, while other sectors were not AML/CFT regulated at all and remain bound only by basic reporting obligations. Some financial institutions do not have a designated AML/CFT supervisor, while some correspondent banking services are not bound by any AML/CFT obligations.&nbsp;Additionally, although South Africa’s larger banks and Financial Institutions (FIs) are focused on AML, smaller FIs are only focused on meeting the minimum requirements for regulatory compliance. This is understandable because smaller FIs do not have the same resources as major banks, but the report criticizes their failures to identify and actively understand risk nonetheless. Recognizing these flaws, the FATF advocates for the full adoption of a Risk-Based Approach to AML regulations.&nbsp;The FATF also emphasized how South Africa’s ongoing public sector corruption continues to undermine national AML/CFT efforts. The period of State Capture undermined the functionality of South Africa’s key AML/CFT agencies, such as the Financial Intelligence Centre and the Financial Sector Conduct Authority.&nbsp;The continuing issue of public sector corruption means that South Africa must deal with the threat posed by <a href="https://thisisme.com/resources/politically-exposed-person" target="_blank">Politically Exposed Persons (PEPs</a>). PEPs are broadly defined as any individual who is, or has in the past, been entrusted with prominent public-sector functions in a particular country. Because the proximity to political power increases the potential for corruption and money laundering activity, PEPs are subject to a specific AML regulation process.&nbsp;However, even with clearly identified threats posed by Politically Exposed Persons (PEPs), South Africa was rated non-compliant with the FATF 40 Recommendations for PEPs. Due to SA’s lack of universal PEP-related obligations, the limited definition of a PEP, and the absence of properly executed risk management systems for monitoring and dealing with PEPs, significant improvements need to be made to upgrade this rating.<h2>October 2021: One-Year Period of Increased Monitoring Begins &nbsp;</h2>Having released its MER report on South Africa’s AML/CFT system and handed over its recommendations concerning critical shortcomings and how to address them, the FATF now began a year of increased monitoring during which time it assessed South Africa’s commitment to addressing its shortcomings, as well as its overall progress in doing so.&nbsp;It was South Africa’s responsibility to demonstrate that it acknowledged the FATF’s report and was taking appropriate steps to address shortcomings and properly.<h2>August 2022/October 2022: South Africa Reports on its Technical Compliance to the FATF&nbsp;</h2>In August 2022, South Africa reported on its progress to the FATF. In October 2022, the period of increased monitoring by the FATF came to an end. In the following months, the FATF will assess South Africa’s progress in addressing the issues highlighted by the MER report and will come to the final decision that will be reported during the final FATF plenary in February 2023.&nbsp;<h2>Upcoming Landmarks and Decisions for 2022 and 2023&nbsp;</h2>In December 2022, the International Co-operation Review Group will submit a report on South Africa’s progress in addressing the identified shortcomings and implementing the necessary changes. Once submitted, there will be a period in which South Africa will be invited to respond to the report.In January 2023, face-to-face meetings will be held between South Africa and other members of the FATF, during which time participants will discuss the progress that has been made and discuss what measures may be taken next.&nbsp;Then, in February 2023, the final FATF Plenary will be held. It is during this meeting that the FATF will decide whether or not to greylist South Africa. Currently, analysts suggest that there is an 85% chance that the FATF will greylist South Africa.&nbsp;<h2>What Will Happen if South Africa Gets Greylisted?&nbsp;</h2>As with all predictions, the exact effects of South Africa getting greylisted remain uncertain for a number of reasons – South Africa is an unusual candidate for greylisting so there are few comparable case studies, while much of the economic impact varies depending on the exact reactions of businesses and financial institutions, which are by nature difficult to predict.&nbsp;However, the most certain impact of greylisting will be increased transactional costs for financial institutions as they are forced to account for heightened <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">due diligence</a> requirements. This may lead businesses to withdraw from South Africa as profitability falls, while others may choose to withdraw as a means of <a href="https://thisisme.com/resources/risk-assessment" target="_blank">de-risking</a> their portfolios.&nbsp;These eventualities may severely undermine South Africa’s economic growth. In the worst-case scenario, greylisting could wipe out up to 3% of SA’s GDP; in the best-case scenario, these estimates are less than 1% of GDP. &nbsp;To read a detailed analysis of the effects of greylisting and understand how such an event would impact South Africa’s economy, click <a href="https://thisisme.com/insights/Greylisting-Impact-on-SAs-Enhanced-Due-Diligence-Compliance-Obligations" target="_blank">here</a>.&nbsp;<h2>Enhanced Due Diligence Services and AML/CFT Compliance Solutions for South Africa&nbsp;</h2>When doing business in a country and ensuring compliance with its complex financial regulations, it is important to employ experts in the relevant country who are best equipped to operate within the nexus of legislation, law enforcement and economic realities while delivering high-quality and cost-effective services. &nbsp;As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.

Analysts predict there is an 85% chance that South Africa will be greylisted by the FATF. Why is this happening and what did South Africa do wrong?

SA's Road to Greylisting - An AML/CFT Regulatory Compliance Timeline

Today, the rapidly changing nature of economic crime means that businesses face a variety of threats that have the capacity to harm professional reputations and cause major financial losses. Notably, however, there is one form of economic crime that spans categories, regions and jurisdictions and still remains one of the most potentially devastating forms of economic crime to affect a business: corruption.&nbsp;<h2>The Rise of Corruption as a Form of Economic Crime&nbsp;</h2>As identified by PwC’s 2020 Global Economic Crime and Fraud Survey, corruption is one form of economic crime that has experienced an increased incidence rate and an increase in associated financial losses. When ranking the most prominent types of economic crime experienced by businesses between 2018 and 2020, “Bribery and Corruption” was 2nd with a 42% incidence rate.&nbsp;Furthermore, when respondents to PwC’s survey were asked to predict their organization’s most deeply felt economic crime over the next 24 months, 19% cited bribery and corruption (1st), 14% cited customer fraud (3rd), and 11% cited cybercrime (4th). Of the South African respondents to PwC’s survey, 1/5 cited bribery and corruption as the most disruptive type of economic crime they had experienced.&nbsp;<h2>Corruption as an External Threat – PEPs, Adverse Media and Business Partner Due Diligence&nbsp;</h2>Corruption as an external threat to a business tracks with the global economic crime landscape. Of the most serious/disruptive incidents of fraud experienced by the surveyed companies, 43% are external perpetrators (2% increase compared to 2020), 31% are internal perpetrators (7% decrease compared to 2020), and 26% are collusion between internal and external perpetrators (5% increase compared to 2020). In total, 69% of all the fraud experienced involved an external perpetrator).&nbsp;Corruption is a serious threat that can affect a company through its clients and business partners – should a company, financial institution or even an SME do business with an entity that has been embroiled in corruption scandals in the past, it risks jeopardizing the company’s reputation simply by association.&nbsp;The risks associated with a failure to conduct proper due diligence skyrocket if a client or business partner is actively engaged in corruption and/or is currently embroiled in a corruption scandal. In such instances, a company may find itself&nbsp;buried&nbsp;in <a href="https://thisisme.com/resources/Adverse-Media" target="_blank">adverse media</a> and dragged into a major public scandal and legal battle even though it did nothing wrong – the company’s proximity to corruption as a result of lacklustre due diligence may be enough to cause significant and lasting damage.&nbsp; When viewed through the lens of corruption, <a href="https://thisisme.com/resources/politically-exposed-person" target="_blank">Politically Exposed Persons (PEPs)</a> are a unique external threat. Although the identification of a PEP does not automatically implicate them in any wrongdoing, their proximity to political power and their consequential heightened capacity to engage in corruption means that they automatically pose a higher risk to businesses and <a href="https://thisisme.com/resources/Accountable-Institution" target="_blank">Accountable Institutions (AIs)</a>.&nbsp;Because of the risk they pose, conducting PEP checks is a legal obligation that falls under <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">South Africa’s AML/CFT legislation</a>; a failure to conduct a PEP check that then leads an accountable institution to engage in business with a PEP as if they were a normal client will cause severe legal penalties to be imposed on that accountable institution. Comprehensive PEP checks, therefore, are a necessity for all accountable institutions that wish to remain legally compliant and mitigate against the risk of corruption.&nbsp;<h2>Corruption as an Internal Threat – Occupational Fraud&nbsp;</h2>The threat of corruption can also come from within a business. In their 2022 publication titled the Report to the Nations, the Association of Certified Fraud Examiners (ACFE) highlighted the growing threat that corruption poses top businesses, specifically as an internal threat posed by a business’s own employees.&nbsp;In 2022, corruption was the most common occupational fraud scheme in every global region assessed by the ACFE. Of all incidents of occupational fraud recorded by the ACFE, 43% of them involved corruption. Shockingly, the median financial losses incurred from a corruption scheme was 11,000 USD per month.&nbsp;Furthermore, corruption was the most pervasive type of occupational fraud scheme across every one of the 15 industries assessed by the ACFE. The industries with the highest rates of corruption were: Energy (66%), Telecommunications (56%), Transportation and Warehousing (52%), Real Estate (48%), and Government and Public Administration (48%).&nbsp;Finally, corruption also disproportionately affected larger companies. In businesses with less than 100 employees, corruption features in 38% of all incidents of occupational fraud. In businesses with more than 100 employees, corruption features in 47% of all incidents of occupational fraud.<h2>Why is Corruption Such as Threat to Businesses – The Value of Trust&nbsp;</h2>Corruption is a serious threat to businesses because the damage it does goes far beyond simple financial losses – loss of trust, reputational damage, public scandal and a significant loss of a business’s market capitalization are all likely consequences of corruption.&nbsp;Today, these consequences are more pronounced than ever before. Over the last several years, there has been a significant increase in public expectations for ethical conduct than ever before, while the public backlash against bad business practices is becoming increasingly severe. In their Global Economic Crime and Fraud Survey, PwC explains how…<blockquote>“…A pronounced shift in the way the world looks at fraud and corruption has taken place over the past few years. And our survey data reflects this now deep-seated demand for accountability, from both the public and from regulators, across the private and public sectors. This is not a phenomenon limited to developed markets, either. Across vastly different cultures, in every region of the world, there are signs of convergence around standards of transparency and expectations of conduct.” – PwC.</blockquote>Furthermore, in a survey by Deloitte, 81% of respondents noted that values such as ethics and integrity are increasingly expected of a company’s conduct and are intrinsically linked to how much consumers are willing to trust a company. When this trust is lost, consumers relate to the breach of trust in a very human way and describe it as betrayal, disappointment and anger. &nbsp;Losing this consumer trust can be a devastating blow for businesses – for some companies in the past, it has been a loss from which they have never properly recovered. A study by Deloitte analysed the cases of three companies that had been embroiled in public scandals related to incidents of economic crime. Because of their scandals, the three companies lost between 20-56% of their market cap over a period of between three months and two years. The combined total value of this loss was approximately $70 billion. The value they lost in relation to their peers was even more severe, with the three companies falling behind their respective industry indexes by 26-74%. &nbsp;<blockquote>“[A business] can find itself punished from all quarters for its perceived inability to respond appropriately… The executives we surveyed consistently ranked reputational harm at or near the top of negative impacts from various forms of economic crime, with public perception (reputation/brand strength, business relations and share price) taking the hardest hit – a level of impact that has increased since 2016.” – PwC.</blockquote>The damage suffered from incidents of economic crime such as corruption – especially reputational damage – has become so severe that businesses cannot afford to overlook corruption as a threat that can cause significant reputational damage, irreparably undermine a business’s reputation, and decay the trust it had built with its clients and the general public.&nbsp;<h2>How Identity Verification, Enhanced Due Diligence and Risk Assessment Tools Can Mitigate Against Corruption?&nbsp;</h2>Corruption – even the proximity to corruption – can pose serious threats to a business’s reputation, market capitalization, and legal standing.&nbsp;Identity verification and data validation tools empower businesses to mitigate the risk of corruption because they equip businesses with the information that is required to make informed decisions. When it comes to risk mitigation concerning <a href="https://thisisme.com/resources/high-net-worth-individuals" target="_blank">high-net-worth individuals</a> and politically exposed persons, the availability of high-quality information is crucial and grants companies the capacity to address and mitigate threats.&nbsp;<h2>PEP Checks, Due Diligence and Identity Verification Services for South Africa&nbsp;</h2>The changing threat landscape of economic crime is presenting businesses with new challenges while evolving consumer expectations for company conduct are holding businesses to higher standards.&nbsp;As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can protect your business while providing a world-class customer experience, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;

Why corruption poses such a threat to businesses and how it can be mitigated with enhanced due diligence and pep checks

Why Corruption is Such a Threat to Businesses and How to Mitigate It

This article offers insights concerning seven ways that financial crime is evolving and posing new threats to businesses. By tracking the statistics of economic crime, one can reveal the evolving trends that define fraud – an awareness that empowers businesses to understand the threats they face and take the steps necessary to mitigate them.<h2>1.) Lower Incidence Rates of Financial Crime&nbsp;</h2>According to PwC’s Global Economic Crime and Fraud Surveys, the incidence rate of economic crime has declined three percentage points over the last six years – compared to 49% in 2018, 46% of respondents experienced an incident of economic crime in the last 24 months. This is progress and a sign that fraud prevention measures are working. However, while the incidence rate has decreased, the total losses from economic crime have increased.&nbsp;<h2>2.) Higher Losses from Financial Crime&nbsp;</h2>Despite the decreasing number of incidents, the total losses from financial crime have been increasing. In South Africa between 2018 and 2020, total losses increased by 4%, totalling more than $1.7 billion (more than 25 billion South African Rand). 7% of South African incidents reported losses of between $50 million and $100 million, while 4% reported losses of more than $100 million.&nbsp;Notably, losses from financial crime and difficult to quantify. In reality, the real losses from financial crime incurred by a business go far beyond the immediate loss of capital and instead include factors such as missed business opportunities, reputational damage, loss of market position, rife distrust, and negative impact on morale and productivity.1 &nbsp;Although these factors are incredibly important and have a real-world impact, they are difficult to quantify and are therefore often overlooked when considering the losses suffered by victims of financial crime.&nbsp;<h2>3.) Changing Perpetrators of Fraud</h2>A crucial development is the shifting of risk from internal to external perpetrators of economic crime. In 2018, internal perpetrators were responsible for 40% of all economic crimes experienced by businesses.In 2020, 36% of economic crimes were committed by external perpetrators, 41% by internal perpetrators, and 21% by collaboration between internal and external perpetrators. In total, 57% of economic crimes involved an external perpetrator. In 2022, of the most serious/disruptive incidents of fraud experienced by the surveyed companies, 43% are external perpetrators (2% increase compared to 2020), 31% are internal perpetrators (7% decrease compared to 2020), and 26% is collusion between internal and external perpetrators (5% increase compared to 2020). In total, 69% of all the fraud experienced involved an external perpetrator.&nbsp;<h2>4.) Drastic Rise in Customer Fraud&nbsp;</h2>PwC only introduced customer fraud as a category of economic crime in 2018. Yet in 2020, it became the most prominent type of economic crime listed in PwC’s report – 47% of South African respondents had experienced it in the last 24 months, compared to 34% of global respondents.&nbsp;Furthermore, respondents to PwC’s survey predicted that customer fraud would be the 3rd most disruptive economic crime for the next two years. Although daunting, the issue of customer fraud is one that can be addressed. While other types of economic crime such as bribery and corruption are far harder to tackle, customer fraud is one where “dedicated resources, robust processes and technology have proven effective in prevention”.2 &nbsp;KYC tools for identity verification and data validation hold the key to safer, more trusting relationships between businesses and their customers.&nbsp;<h2>5.) Growing Threat of Business Partner Fraud &nbsp;</h2>Although the threat of fraud committed by business partners has remained relatively consistent over recent years, the schemes have grown increasingly complex and difficult to protect against. PwC’s survey has changed since 2018, with questions in 2020 and 2022 asking businesses the perpetrator of their most disruptive incident of economic crime. In 2018, the report noted that “68% of external actors committing the fraud are ‘frenemies’ of the organisation – agents, vendors, shared service providers and customers.”&nbsp;In 2020, respondents were asked to identify the external perpetrator responsible for the most disruptive economic crime incident they suffered in the last two years. 18% of respondents cited vendor/supplier, 15% cited joint venture/alliance partner, and 13% cited consultant/advisor. Combined, these three groups – all categorized as business partners of some form – were responsible for 46% of the most disruptive economic crimes against the responding businesses.&nbsp; Fraud committed by a business partner poses a serious threat to businesses and risks destroying the trust which allows economies to operate smoothly. As this trust is being shaken, verified identities and proven strategies for <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessment and risk mitigation</a> are increasingly becoming the only way for businesses to ensure transactional security and protect themselves against the threat of economic crime.&nbsp;<h2>6.) Slow Decline in Losses from Occupational Fraud&nbsp;</h2>Occupational fraud – defined as “fraud committed by individuals against the organizations that employ them” – is one of the costliest forms of financial crime in existence. The Association of Certified Fraud Examiners (ACFE) estimates that today, organizations lose roughly 5% of their revenue to occupational fraud – a percentage that equates to annual global losses of over $4.7 trillion.&nbsp;Nevertheless, the threat of occupational fraud is declining. Reflecting on trends from 2012 to 2022, the ACFE notes a 16% decline in median losses from occupational fraud and a 33% decrease in the median duration of fraud schemes. However, occupational fraud remains a significant threat to is evolving like all other types of financial crime. The percentage of cases involving corruption has increased from 33% in 2012 to 50% in 2022.&nbsp;Comprehensive KYC protocols that include credit checks for new employees remain a crucial way for businesses to pick up on clear behavioural red flags of occupational fraud, such as living beyond means – the number one most common behavioural red flag since 2008.&nbsp;<h2>7.) Continued Sky-High Growth of Social Engineering Fraud&nbsp;</h2>When analysing trends of economic crime over the last eight years, no category of fraud comes close to matching the growth of social engineering fraud – a concept that encompasses phishing, smishing, vishing and spoofing.&nbsp;The FBI’s Internet Crime Report details the immense growth of social engineering fraud. In 2017, the FBI recorded 25,344 incidents of social engineering fraud. By 2021, this number had grown to 323,972 – a shocking 1,178% increase in only five years. Furthermore, of the 847,376 total complaints of cybercrimes made to the FBI in 2021, 32.8% of them referenced a form of social engineering.&nbsp;Social engineering is a broad concept that encompasses many different types of fraud – BEC scams, smishing, vishing and spoofing all fall under the category of social engineering fraud. To read more about the evolution of social engineering fraud, click <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;<h2>The Utility of Identity Verification, Due Diligence ad Risk Assessment Tools&nbsp;</h2>Today, businesses are having to adapt to rapidly evolving threats that present new and complex challenges to be overcome. The threat of devastating losses from economic crime increasingly necessitates the use of tools for risk mitigation. By adopting and integrating tools for <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification and data validation</a>, businesses empower themselves to gather information and conduct world-class <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessment and risk mitigation</a> to protect themselves from the threat of economic crime.&nbsp;Furthermore, new laws and regulatory compliance obligations compel businesses to meet adopt certain practices regarding identity verification, data validation and risk assessment and mitigation. Although these good practices are necessary to secure our economies against fraud, the growing portfolio of <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">regulatory compliance obligations</a> may present a challenge for SMEs that lack the knowledge and resources of larger companies. In such cases, partnering with a company that will ensure your business meets its regulatory compliance obligations as efficiently and cost-effectively as possible is paramount.&nbsp;Due Diligence, Risk Assessment and Identity Verification Services in South Africa &nbsp; As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of KYC, advanced due diligence services, risk assessment and data validation services can help your business adapt to a rapidly evolving threat landscape, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>. Citations&nbsp;<ol><li>PwC. Global Economic Crime and Fraud Survey. 2020.</li><li>PwC. Global Economic Crime and Fraud Survey. 2020. </li></ol>

How the evolving nature of fraud is changing how businesses use due diligence, risk assessment and identity verification services in South Africa

Fraud is Changing – 8 Ways Financial Crime is Evolving, in Statistics

The Association of Certified Fraud Examiners (ACFE) has released their latest Report to the Nations study on the global impact of occupational fraud. In addition to revealing key trends and highlighting the immense costs of occupational fraud, the report also discusses the behavioural red flags for occupational fraud. By understanding what behavioural red flags are and how to look for them, businesses can adopt KYC-based employee screening protocols to proactively address the threat posed by the perpetrators of occupational fraud.&nbsp;<h2>The Cost of Occupational Fraud</h2>The ACFE estimates that organizations around the world are losing 5% of their revenue to fraud every year – a percentage that equates to global losses of over USD 4.7 trillion every year. In 2022, the report covered 2,110 cases with losses totalling USD 3.6 billion. The median loss per case was $117,000 while the average loss per case was $1,783,000 – 21% of occupational fraud cases resulted in losses of over $1 million.&nbsp;<blockquote>“Occupational fraud – fraud committed by individuals against the organizations that employ them – is among the costliest forms of financial crime in existence.” – ACFE.</blockquote>Although falling victim to occupational fraud is a clear and present financial threat that businesses must consider, taking steps to actively address such a diverse threat may seem challenging. While measures such as employee training and company culture are complex and will vary from organisation to organisation, there is one key approach to combating occupational fraud that remains consistent and easily accessible for all businesses: KYC-based employee screening during the onboarding process.<h2>What are Behavioural Red Flags?&nbsp;</h2>Businesses can search for and identify specific details about customers or employees using <a href="https://thisisme.com/resources/know-your-customer" target="_blank">KYC</a> tools for identity verification and data validation – examples include credit checks and employment history verification. However, exactly what a business sees as a “red flag” will vary on a case-by-case basis.&nbsp;For example, a car rental company will likely consider age and gender to be potential red flags – male customers between the ages of 18 and 25 pose the highest risk of damaging a rented vehicle. However, from the perspective of a large financial institution in the process of hiring a new accountant, age and gender will matter less.Instead, the financial institution may closely scrutinize a prospective employee’s credit rating, because high levels of debt have proven to indicate that said employee poses a higher risk of committing occupational fraud in the future.&nbsp;<h2>Living Beyond Means – Key Behavioural Red Flags for Fraud&nbsp;</h2>Like with every crime, there exist behavioural trends which signal that an individual poses a higher risk for perpetrating a specific crime. The ACFE has identified eight behavioural red flags which indicate a higher risk of occupational fraud, chief among which is an individual “living beyond their means”.&nbsp;<blockquote>“A fraudster living beyond his or her means is the most common red flag by a sizeable margin. This has ranked as the #1 red flag in every study since 2008.” – ACFE.&nbsp;</blockquote>Living beyond one's means – defined as spending more money than one can afford to spend – will typically entail a person making purchases on credit and accumulating a large amount of debt. In 2022, the perpetrator “living beyond their means” was the most dominant red flag for occupational fraud and was featured in 39% of occupational fraud incidents, while “financial difficulties” was the second most common red flag and featured in 25% of incidents.&nbsp;When ranked by their incidence rate, the top five behavioural red flags for occupational fraud are:&nbsp;<ol><li>Living beyond means (39%)</li><li>Financial difficulties (25%)</li><li>Unusually close association with vendor/customer (20%)</li><li>Control issues, unwillingness to share duties (13%)</li><li>Irritability, suspiciousness, or defensiveness (12%)</li><li>Bullying or intimidation (12%)</li><li>Divorce/family issues (11%)</li><li>Wheeler-dealer attitude (10%)</li></ol>Some of these behavioural red flags will reveal themselves over time and are therefore difficult to pick up on during a routine interview and background check. Because of the challenges inherent in trying to note and act on these red flags, it is important to proactively attempt to identify those that one can, such as high levels of debt that can be revealed with a credit check.&nbsp;<h2>KYC Services – The Value of Background Checks During Employee Onboarding&nbsp;</h2>Individuals living beyond their means will oftentimes be reflected in their credit scores. In this context of enhanced KYC, credit checks play a key role in identifying the two most critical behavioural red flags characteristic of prospective employees that pose a high risk of occupational fraud.&nbsp;<blockquote>“Background checks are an important tool in the fight against fraud, as they can prevent organizations from hiring individuals with known histories of misconduct.”&nbsp;</blockquote>Background checks as part of the hiring process are a crucial mechanism that a business can use to address the threat of occupational fraud. &nbsp;Shockingly, however, 43% of organizations that fell victim to an incident of occupational fraud did not conduct any background checks on the employee who would later commit occupational fraud. Furthermore, of those organizations who did carry out background checks on the individual, 21% of the time these checks revealed clear red flags but the individuals were hired anyway and would later go on to commit occupational fraud.&nbsp;Comprehensive KYC protocols that are carried out during the employee onboarding process offer a reliable, fast and cost-effective way to identify prospective employees who pose a high risk of occupational fraud. By doing this, businesses can better protect themselves from occupational fraud and financial crime in the future.&nbsp;<h2>Employee Verification During the Onboarding Process</h2>In their report, the ACFE includes a checklist that is designed as a benchmark to help businesses evaluate the integrity of their fraud prevention mechanisms.&nbsp;The eighth point on the checklist encompasses employee verification checks to be completed during the hiring process. These include:&nbsp;<ul><li>Past employment verification&nbsp;</li><li>Criminal and civil background checks&nbsp;</li><li>Credit checks&nbsp;</li><li>Drug screening&nbsp;</li><li>Education verification&nbsp;</li><li>Reference checks&nbsp;</li></ul>These checks encompass crucial mechanisms for evaluating and validating employee identity and integrity. Integrating these checks into the employee hiring and onboarding process allows a business to screen new employees for some of the most obvious and easily detectable risk indicators.&nbsp;<h2>The Issue of Scalability – Tailored KYC Solutions by Organizational Size&nbsp;</h2>Problematically, there exists a major discrepancy between the rate at which smaller businesses adopt anti-fraud controls when compared to larger organizations.<blockquote>“Whether it’s due to resource limitations, a lack of awareness, or a tendency to place too much trust in their employees, small businesses implement anti-fraud controls at a much lower rate than their large counterparts.” – ACFE.</blockquote>This discrepancy between large and small businesses is significant and represents a serious risk for smaller businesses. With fewer resources and less capital in reserve, smaller businesses are significantly more vulnerable when it comes to dealing with the fallout from an incident of occupational fraud. &nbsp;<blockquote>“Small businesses (those with fewer than 100 employees) had the highest median loss of USD 150,000, while large organizations (those with more than 10,000 employees) had a median loss of USD 140,000. It is important to note, however, that a small business likely will feel the impact of a loss this size much more than its larger counterparts.” – ACFE.</blockquote>For companies with high staff turnover, detailed screening processes that include meaningful person-to-person interviews are costly and often unrealistic. In these instances, a business wants to screen and onboard new employees as quickly and efficiently as possible, while still maintaining a high level of security protocols to guard against the risk of occupational fraud.&nbsp;<h2>KYC Services and Digital Onboarding Solutions in South Africa&nbsp;</h2>ThisIsMe offers scalable KYC solutions for employee onboarding that are designed to meet the demands of any business. Our advanced API allows for automated, cost-effective, large-scale remote onboarding procedures to be carried out with ease. For businesses with less intensive employee onboarding demands, our Partners platform provides scalable access to our world-class KYC services at a competitive price point.&nbsp;As South Africa’s leading provider of world-class KYC, due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of KYC, advanced due diligence services, risk assessment and data validation services can help your business address the threat of occupational fraud, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us">here</a>.&nbsp;<div> </div>

Understand how the threat of occupational fraud - estimated to cost the global economy $4.7 trillion per year - can be addressed with KYC

Behavioral Red Flags - Minimizing Occupational Fraud Risk with KYC

Understand how the ACFE’s new report into occupational fraud empowers businesses to proactively combat occupational fraud.

The Cost of Occupational Fraud – Why Employee KYC Is Crucial

ThisIsMe has launched a new prepaid service offering. Standing alongside ThisIsMe’s Partners and Enterprise service offerings, Prepaid offers a pay-as-you-go system that represents great value for clients who only require low to moderate usage of ThisIsMe’s consumer and business services.For ThisIsMe, the launch of Prepaid signals an exciting milestone for the company as we continue to broaden our appeal and improve the accessibility of our services.&nbsp;<h2>How does Prepaid Work?&nbsp;</h2>Prepaid functions as a pay-as-you-go system and charges no monthly fees.&nbsp;Clients using Prepaid can charge their account with any amount above a minimum of R295. Thereafter, any prepaid service transactions will automatically be charged from this loaded amount. Credits do not expire and entail no obligations – once loaded, credits can be spent as and when the client wishes.&nbsp; Access to ThisIsMe’s range of services is facilitated through our Partners platform: a web-user interface that offers efficient and streamlined access to our broad range of world-class solutions. ThisIsMe’s Partners platform is completely online and facilitates the secure, efficient and accessible use of our services.&nbsp;<h2>Who is Prepaid For?&nbsp;</h2>ThisIsMe’s prepaid service offering has been optimized for clients who will process low to moderate volumes of service requests.&nbsp;ThisIsMe’s Prepaid service offering may be best if your business:&nbsp; <ul><li>Processes smaller numbers of requests associated with identity verification and data validation&nbsp;</li><li>Requires access to a wide variety of identity verification and data validation services, yet only in low volumes</li><li>Experiences low-volume and varied demand for services related to identity verification and data validation&nbsp;</li><li>Does not require API integration</li><li>Does not require multiple access accounts to ThisIsMe’s Partners platform</li></ul>ThisIsMe’s Prepaid service offering has been optimized for the requirements of businesses such as wealth managers, small- and medium-sized law firms, real estate agencies, and conveyancing firms.&nbsp; ThisIsMe’s prepaid service offering can be used by any client; however, they have been optimized to best suit clients with lower processing demands who do not need to make significant use of our consumer and business services or require API integration. &nbsp; Clients who process larger batches of data will be better served by ThisIsMe’s Partners or Enterprise service offerings.&nbsp;<h2>ThisIsMe – Leaders in Identity Verification and Data Validation Services&nbsp;</h2>Prepaid provides access to ThisIsMe’s core range of services. These services include the ability to scan documents, evaluate risk, validate bank accounts, and screen for politically exposed persons and sanctions. ThisIsMe’s prepaid service offering does not cover services that require high-risk credit information calls.&nbsp;To get started and sign up for ThisIsMe’s Prepaid service offering, <a href="/getting-started">click here</a>.&nbsp; To find out which service offering will best suit your business, <a href="/contact-us">book a consultation</a> with our team here.&nbsp; As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world.&nbsp;

A new prepaid offering from ThisIsMe allows companies with a smaller requirement to easily fulfil their verification needs

ThisIsMe Launches New Prepaid Service Offering

A new report into occupational fraud reveals key trends and insights and empowers businesses to proactively address the threat of fraud.

How to Proactively Address the Threat of Occupational Fraud Using KYC

Grasp the concept of social engineering fraud and understand how it is used to commit some of South Africa’s most costly types of economic crime.

How Social Engineering Exploits Trust and Identities to Commit Fraud

Today, businesses must grapple with a rapidly changing economic crime threat landscape, ensure strict regulatory compliance, and provide a world-class digital customer experience. In the context of these demands, how might a business strike a balance between security protocols like KYC and the desire to not subject customers to admin that risks annoying customers or, at worst, losing them altogether?&nbsp;<h2>A Novel Threat – The Rise of Customer Fraud&nbsp;</h2>Today, businesses face a rapidly evolving economic crime landscape. The nature of existing threats is changing, with a greater emphasis than ever on the threat posed by external perpetrators of economic crime, especially customers.&nbsp;PwC’s Global Economic Crime and Fraud Survey tracks the trends that define the economic crime threat landscape. In the survey’s various categories of fraud, the category of “customer fraud” was only introduced in 2018, due to its historically minimal threat to businesses.&nbsp;However, in 2022, customer fraud has exploded and now ranks as the second most common type of economic crime – its incidence rate is three percentage points higher than in 2020. Notably, for companies with annual global revenues of more than $10 billion, customer fraud was the number one type of fraud experienced. For all companies with annual revenues of less than $10 billion, customer fraud was the second most common type of fraud experienced, behind cybercrime.The growth of customer fraud represents a global trend in the increased threat posed by external perpetrators of economic crime. In total, 69% of all the fraud experienced involved an external perpetrator. The threat posed by customer fraud – and the broader threat posed by external perpetrators of economic crime – necessitates that businesses implement KYC protocols to secure business perimeters and their transactions with customers and business partners alike.&nbsp;<h2>Striking the Balance – KYC, Without Compromising Customer Experience&nbsp;</h2>Today, businesses operate in a rapidly changing world – threats of economic crime, regulatory compliance obligations, and customer expectations have all seen significant changes over the course of only the last several years. Seismic events such as the Covid-19 pandemic have accelerated the rate of change.&nbsp;<blockquote>“Partly as a result of the pandemic, customer expectations are expanding beyond companies delivering high-quality products and services to them ensuring data privacy [and] providing a world-class digital experience to customers.” – Deloitte.</blockquote>Growing consumer demand for world-class digital customer experiences pose a unique challenge for businesses. On the one hand, the pervasive threat of customer fraud necessitates the implementation of KYC protocols. On the other hand, businesses cannot afford to let these protocols worsen the customer experience.<blockquote>“CDD procedures are among the main sources of dissatisfaction for customers. The process of collecting and verifying information is often difficult and strenuous, filled with endless requests for documents and additional in-person periodic evidence submissions.” – FATF.</blockquote>However, the emergence of new technologies has transformed CCD/KYC procedures. In 2017, ThisIsMe transformed the South African RegTech industry by cutting FICA compliance down from two weeks down to three minutes – an achievement that got the company featured as one of the Emerging 50 Rising Stars on the 2018 FINTECH100 list.The transformation of FICA compliance – enabled by new digital technologies – allowed businesses to save time and money and ensure the highest levels of AML/CFT compliance, while consumers benefited from easier documentation provision and near-instantaneous personal information validation. Today, this innovation continues in the provision of excellent KYC services that can ensure security without compromising on customer experience.<h2>Optimising Compliance – Tailored KYC Solutions to Fit Every Demand&nbsp;</h2>Every business has its own unique set of requirements for security and KYC optimisation and service provision. Adapting digital security protocols to a business’s unique requirements is key to ensuring maximum effectiveness, minimizing costs, and ensuring the best possible customer experience.&nbsp;<blockquote>“Be too passive and the organisation risks missing a fraudulent transaction, with all the financial and reputational fallout that follows. But be too proactive, and they risk alienating, or even losing, their customer base.” – PwC.&nbsp;</blockquote>South Africa’s application of a <a href="https://thisisme.com/resources/risk-based-approach" target="_blank">Risk-Based Approach (RBA)</a> means that every <a href="https://thisisme.com/resources/Accountable-Institution" target="_blank">Accountable Institution (AI)</a> has to design and implement a framework of security protocols that are to be deemed sufficient by the Financial Intelligence Centre (FIC). By using a tailored approach to risk, businesses can reduce <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">due diligence</a> requirements for individuals that are identified as being low-risk. Discussing the utility of revolutionary new technologies for enhancing the customer experience, the Financial Action Task Force (FATF) commented that…<blockquote>“Innovative technology-based solutions – both digital ID and AML compliance transaction monitoring tools - can facilitate more accurate and up-to-date risk assessments at an optimised cost and provide greater confidence in the conclusions of that risk assessment, enabling greater use of simplified due diligence where appropriate.” – FATF.&nbsp;</blockquote>Greater detail and accuracy in <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessments</a> save time and money by allowing businesses to conduct due diligence that is appropriate to the level of risk posed by an individual. This not only saves the business time and money but also provides a better customer experience.&nbsp;<h2>KYC and Customer Experience – Have Your Cake and Eat it Too</h2>Today, the availability of transformative technological solutions to ensure security and compliance – all of which can be tailored to the demands of a specific business – mean that organizations can strike a balance between security and un-intrusive administration, therein upholding the highest standards for security and regulatory compliance while simultaneously providing an excellent customer experience. &nbsp;As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business and its customers, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;<div> </div>

Understand how new KYC solutions allow businesses to conduct comprehensive identity verification within a seamless, world-class customer experience.

Does KYC worsen the customer experience? Not anymore.

Forms of social engineering such as phishing, smishing, vishing and spoofing have become increasingly pervasive and represent some of the greatest threats to digital security. The latter of these – spoofing – poses an immense threat to individuals and businesses alike. Spoofing has facilitated devastating cases of business partner fraud in South Africa – understanding the threat it poses, as well as how to combat it, is key to protecting business perimeters.&nbsp;<h2>What is Spoofing – Social Engineering Techniques Explained&nbsp;</h2>Put simply, <a href="https://thisisme.com/resources/social-engineering" target="_blank">social engineering</a> encompasses a range of techniques that are used by fraudsters to trick a victim into performing certain acts or willingly divulging sensitive information like passwords and credit card details. Social engineering scams use psychological manipulation by preying on human nature, vulnerabilities, and trust to trick innocent victims into handing over sensitive information that can then be used to commit fraud.&nbsp;As digital security chains become harder to crack, the human element has become the weakest link. Now, instead of breaking into digital systems, it has become easier for criminals to employ social engineering techniques to extract sensitive information, which can then be used to access secure digital systems with zero force. Reflecting these trends, a report by Mimecast shows that more than 90% of security breaches involve some degree of human error.&nbsp;Social engineering fraud has become such a pervasive category of economic crime that it has been broken down into smaller sub-categories: phishing, smishing, vishing, and spoofing are all variations of social engineering fraud.&nbsp;Of these four, spoofing is unique because it relies primarily on visual deception and trickery through impersonation. By preying on human nature, vulnerabilities, and trust, spoofing scams steal the identities of legitimate organizations or individuals and trick innocent victims into trusting impersonated emails, websites, mobile apps, and social media posts – tools that are used by the criminals to harvest sensitive information and conduct fraud.&nbsp;<h2>Social Engineering Statistics – The Fastest Growing Category of Fraud&nbsp;</h2>The FBI’s Internet Crime Report details the immense growth of social engineering fraud. In 2017, the FBI recorded 25,344 incidents of social engineering fraud. By 2021, this number had grown to 323,972 – a shocking 1,178% increase in only five years. Furthermore, of the 847,376 total complaints of cybercrimes made to the FBI in 2021, 32.8% of them referenced a form of social engineering.&nbsp;Mimecast’s report titled “The State of Email Security 2022” highlights the rapidly growing threat of spoofing. In this survey, 46% of respondents noted an increase in spoofing fraud during 2021. On average, companies reported experiencing 10 spoofing attacks per year – Germany had the highest incidence rate, with 16 attacks per year. These trends reflect the changing threat landscape facing businesses and the growing danger posed by external perpetrators of fraud.&nbsp;Spoofing scams can have immensely damaging consequences. On the one hand, the targets of spoofing scams put themselves and their businesses at risk by giving away sensitive information. On the other hand, those who get their identity stolen and exploited – whether they are companies or individuals – often suffer immense reputational damage during the scam’s fallout. The harm that spoofing scams can inflict is clearly demonstrated through the case studies of various South African companies that were scammed out of PPE supplies during the Covid-19 pandemic.<h2>Spoofing Case Studies – Identity Theft and Vendor/Supplier Fraud&nbsp;</h2>In 2021, investigations revealed how criminals used forms of spoofing to defraud suppliers of medical equipment out of millions of Rands worth of stock. Criminals stole the identity of legitimate businesses by spoofing emails and websites, even going so far as to hire out entire office blocks to impersonate the identities of legitimate companies.Having employed detailed spoofing techniques in order to fake a legitimate identity, the criminals then submitted applications to various suppliers of PPE for stock to be supplied on credit. Due to these spoofed identities and various failings of the credit check companies, the criminals were granted stock on credit that they subsequently stole the moment it was delivered, thereafter vanishing without a trace.&nbsp;Fraud committed by a business partner is a devastating event. Of all South African respondents to PwC’s survey, 1/3 cited distrust as the most significant emotional impact of such incidents.1Trust – understood as “our willingness to be vulnerable to the actions of others because we believe they have good intentions and will behave well towards us” – is the fabric that binds societies and economies together and ensures they can function well. However, scammers abuse this trust for personal gain through social engineering techniques like spoofing.Social engineering scams are successful because they betray the trust we place in one another. Partly because of scams like these, we are more suspicious of businesses, government and each other than ever before.2 The share of the global population that felt like most people could be trusted has fallen by 20% over the last 15 years.3 &nbsp;<h2>Securing Business Relationships and Transactions – Due Diligence and Fraud Prevention&nbsp;</h2>The aforementioned case study demonstrates the risk inherent in business relationships. On the one hand, the relationship between a business and its customers is increasingly insecure and hazardous – customer fraud is now the second most common type of economic crime and is the most pervasive type of fraud experienced by companies with annual global revenues of more than $10 billion.4 &nbsp;On the other hand, the relationship between a business and its suppliers, consultants, joint venture partners and other such business partners is increasingly fraught with risk – respondents to a PwC survey identified business partners as being responsible for 46% of the most disruptive economic crimes against the responding businesses.&nbsp;Shockingly, however, 24% of respondents to PwC’s survey had no third-party <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">due diligence</a> or <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk monitoring program</a> whatsoever, despite 20% of respondents citing vendors/suppliers as the perpetrator of their most disruptive incident of financial crime. This discrepancy must be addressed if businesses wish to operate in an environment free from crippling distrust.5 &nbsp;<h2>Enhanced Due Diligence, KYC and Identity Verification Services South Africa&nbsp;</h2>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>. Citations&nbsp;<ol><li><meta charset="UTF-8">PwC’s 2020 Global Economic Crime and Fraud Survey. </li><li>Edelman Trust Barometer 2021. </li><li>Deloitte. The link between trust and economic prosperity. </li><li>PwC. Global Economic Crime and Fraud Survey 2022. </li><li>PwC. Global Economic Crime and Fraud Survey. 2020. </li></ol>

“Spoofing” and identity theft pose an immense threat to businesses. Understanding spoofing is crucial to protect against this economic crime.

What is Spoofing? How Identity Theft and Social Engineering Drive Fraud

<div>Social engineering and its various forms – such as phishing, smishing and vishing – have experienced shocking growth in recent years. As the human factor becomes the easiest point in a business for fraudsters to exploit, understanding the threats posed by social engineering is crucial if a business wants to secure and protect its external perimeters against economic crime. &nbsp;</div><h2>Social Engineering Fraud – The Anatomy of a Phishing Scam&nbsp;</h2>Put simply, <a href="https://thisisme.com/resources/social-engineering" target="_blank">social engineering</a> encompasses a range of techniques that are used by fraudsters to trick a victim into performing certain acts or willingly divulging sensitive information like passwords and credit card details. Social engineering scams use psychological manipulation by preying on human nature, vulnerabilities, and trust to trick innocent victims into handing over sensitive information that can then be used to commit fraud.&nbsp;To this extent, social engineering techniques are not a criminal’s goal or end objective. Instead, social engineering can be understood as a tool that is used to obtain the information necessary to commit fraud.As digital security chains become harder to crack, the human element has become the weakest link. Now, instead of breaking into digital systems, it has become easier for criminals to employ social engineering techniques to extract sensitive information, which can then be used to access secure digital systems with zero force. Reflecting these trends, a report by Mimecast shows that more than 90% of security breaches involve some degree of human error.&nbsp;The FBI’s 2021 Internet Crime Report shows how pervasive social engineering scams have become. In 2017, the FBI recorded 25,344 incidents of social engineering fraud. By 2021, this number had grown to 323,972 – a shocking 1,178% increase in only five years. Because social engineering fraud has become so pervasive, the concept has been broken down into smaller sub-categories: phishing, smishing, and vishing. Another type of social engineering fraud is spoofing, which has become a serious threat to businesses that encompasses Business Email Compromise (BEC) scams— one of the costliest types of fraud.&nbsp;<h2>What is Phishing?&nbsp;</h2>Phishing – a play on words based on the concept of fishing for personal information – is the fraudulent practise of tricking an individual into handing over sensitive information. Phishing was the original term used to describe most social engineering scams. Now, however, the terms “smishing” and “vishing” are used to describe more specific forms of social engineering.&nbsp;Regardless of the exact term used, social engineering tactics can best be understood as a tool used by criminals to harvest sensitive information that can then be used to defraud the victim. For example, the information harvested from a successful social engineering scam will enable the practical completion of other forms of economic crime such as identity fraud, credit card fraud, or SIM swap fraud.<h2>What is Smishing?&nbsp;</h2>Smishing – a combination of “SMSing” and “phishing” – refers to text message scams. Like all other <a href="https://thisisme.com/resources/social-engineering" target="_blank">social engineering</a> scams, smishing scams will impersonate a trusted source and attempt to fool the victim into handing over personal information.&nbsp;They may also trick the target into clicking on a dangerous link that installs malware or directs the target to a fraudulent website – either way, the goal is to steal sensitive personal information that can then be used to defraud the victim. Smishing may also occur on any other text-based message mediums – direct messaging services such as those found on Instagram and Facebook are also common mediums for Smishing.&nbsp;<h2>What is Vishing?&nbsp;</h2>Vishing (a combination of “voice” and “phishing”) refers to voice scams. Common examples include a call from someone claiming to represent a trusted source with whom you do business, who then typically asks you to confirm your user information, thereby handing over sensitive information such as account login details.&nbsp;The most common type of vishing will be a call to report an issue of some kind: a faulty payment, an issue with your account, or supposed suspicious activity on your account that requires your verification. Regardless, the caller will attempt to pressure the victim into handing over sensitive information, which is often done by communicating a dire sense of urgency to the victim in order to confuse and subtly threaten them into complying.&nbsp;<h2>What is Spoofing?&nbsp;</h2>Of all the types of social engineering techniques, spoofing is unique because it relies primarily on trickery and visual deception through impersonation. By preying on human nature, vulnerabilities, and trust, spoofing scams steal the identities of legitimate organizations or individuals and trick innocent victims into trusting impersonated emails, websites, mobile apps, and social media posts.&nbsp;Due to its incredibly effective use of impersonation and identity theft, spoofing is the category of social engineering that poses arguably the greatest threat to businesses and individuals alike. To find out more about the threats that spoofing poses to businesses and how ThisIsMe can help protect against it, read our analysis here. &nbsp;<h2>Transactional Insecurity – Addressing Business Partner Fraud with Identity Verification &nbsp;</h2>Social engineering scams – especially spoofing – have become a significant threat facing businesses and are integral to a changing threat landscape that is increasingly dominated by external perpetrators of economic crime who exist outside of a business (as opposed to internal employees or managers). &nbsp;According to surveys by PwC, 69% of all fraud incidents experienced by businesses involved an external perpetrator. &nbsp;More specifically, business partners were responsible for 46% of the most disruptive economic crimes against the responding businesses. &nbsp;These issues are magnified in South Africa. Since 2009, the country’s incident rate has been, on average, 27 percentage points higher than the global average. In 2020, South Africa was tied with China for the country with the highest reported incident rate of economic crime. &nbsp;In this context of pervasive economic crime, <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">enhanced due diligence</a> solutions that can offer transactional security by verifying the identities of individuals and businesses alike have become essential to protect against devastating incidents of economic crime.&nbsp;<div>As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services and see how we can help your business secure its transactions and relationships, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;</div>

Social engineering explained with a focus on how phishing, vishing, smishing and spoofing pose some of the greatest threats to businesses today.

What is Phishing? Social Engineering and Identity Fraud Explained

Understand why maintaining consumer and stakeholder trust is essential for any business, and why failing to do so can become an existential issue.

Fraud vs Reputation – Why Companies Cannot Afford to Break Trust

Understand how to secure business perimeters and combat the new threats posed by external perpetrators of economic crime.

Why External Perpetrators are the Greatest Threat of Economic Crime

Over the last decade, the FinTech and RegTech industries have revolutionized the effectiveness, cost, useability, availability and overall nature of AML/CFT regulatory compliance. Today, a wide selection of services empowers businesses to easily secure their transactions and ensure regulatory compliance, all without compromising customer experience – a contribution so significant that it has been recognized in a report by the global leader in AML/CFT legislation: the FATF.<h2>A Pervasive Threat – Money Laundering and Economic Crime&nbsp;</h2><a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">Money laundering</a> – the “cleaning” of criminal revenue to disguise its illegal source and facilitate its use in legitimate, everyday activities – has become a major concern for the vitality of our global financial system. A 2020 report by Deloitte estimated that money laundering makes up 2-5% of the global GDP, as much as $2 trillion. Pieter Alberts, senior operations manager at the Financial Intelligence Centre, said that South Africa is losing between $10 billion and $25 billion annually in illicit financial flows.&nbsp;Although combating money laundering is a clear and urgent task, doing so in a way that does not undermine or harm businesses is equally important. The Financial Action Task Force (FATF) – an intergovernmental organization and global leader in AML policy – published a report titled <a href="https://www.fatf-gafi.org/publications/fatfrecommendations/documents/opportunities-challenges-new-technologies-for-aml-cft.html" target="_blank">Opportunities and Challenges of New Technologies for AML/CFT</a>. By discussing the opportunities for revolutionary AML/CFT programs offered by new technologies, the FATF’s report examines how the Fintech, Regtech and Suptech industries are driving revolutionary new approaches to <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT compliance</a>.&nbsp;<h2>Boosting AML/CFT Compliance Effectiveness &nbsp;</h2>The FATF’s report included a survey that examined how new technologies are being developed and deployed for AML/CFT. Commenting on the results of their Digital Transformation questionnaire, the FAFT noted that…<blockquote>“85% of respondents agree that AML/CFT effectiveness in general is the most significant benefit of the use of new technologies…Respondents declared speed, flexibility, capability and better governance as the outcomes of new technologies contributing to greater AML/CFT effectiveness.”</blockquote>Respondents also noted that new technologies can significantly reduce the costs associated with effective AML/CFT programs – a factor that greatly increases AML/CFT effectiveness by providing stakeholders with better, more accessible tools for less money.For developing economies in which businesses typically have less capital to devote to security and regulatory compliance (like in South Africa), reduced costs are vital for enabling the widespread adoption of effective AML/CFT programs. Since 2009, South Africa’s incident rate for economic crime has been, on average, 27 percentage points higher than the global average.1 In 2020, South Africa was tied with China for the country with the highest reported incident rate of economic crime. &nbsp;To secure South Africa’s economy, the widespread adoption of AML/CFT programs is essential.&nbsp;However, in 2020, the FATF released a <a href="https://thisisme.com/insights/SA-AML-Policy-is-Deficient-Financial-Action-Task-Force" target="_blank">report evaluating South Africa’s AML/CFT regulatory system</a>. The report identified several critical weaknesses, one of which was a discrepant focus on AML controls. Although many of SA’s larger Financial Institutions (FIs) were focused on creating and maintaining effective AML/CFT regimes, many smaller FIs were only focused on meeting the minimum requirements for regulatory compliance. Although this is understandable because smaller FIs do not have the same resources as major banks, innovation and the creation of new cost-effective technologies will continue to close this resource gap. &nbsp;&nbsp;<blockquote>“New technologies have the potential to make anti-money laundering (AML) and counter terrorist financing measures (CFT) faster, cheaper, and more effective. They can improve the implementation of FATF Standards to advance global AML/CFT efforts, ensure financial inclusion and avoid unintended consequences such as financial exclusion.”</blockquote>As South Africa’s economy grows and becomes increasingly digitalized, innovation from the RegTech, Fintech and Suptech industries will be central in provisioning more accessible AML/CFT services and promoting their widespread adoption. &nbsp;<h2>The Transformation of FICA Compliance&nbsp;</h2>Efforts to combat economic crime and close the net on money laundering have led to a web of compliance obligations, many of which negatively affected customer experience. South Africa’s Financial Intelligence Center Amendment Act (FICA) is a perfect example. Although necessary to help secure South Africa’s economy and protect businesses and consumers from economic crime, FICA compliance quickly became a notoriously laborious process.&nbsp;Initially, FICA compliance cost businesses time and money by forcing them to engage in inefficient and lengthy administration that consumed human resources. The labour-intensive process of ensuring compliance also contained many moving parts that rendered it vulnerable to non-compliance or fraud. For customers, FICA compliance entailed complex paperwork and time wasted standing in a bank queue.&nbsp;In 2017, ThisIsMe transformed the South African RegTech industry by cutting FICA compliance down from two weeks down to three minutes – an achievement that got the company featured as one of the Emerging 50 Rising Stars on 2018’s FINTECH100 list.&nbsp;The transformation of FICA compliance – enabled by new technologies – allowed businesses to save time and money and ensure the highest levels of AML/CFT compliance, while consumers benefited from easier documentation provision and near-instantaneous <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification</a>.&nbsp;<h2>Streamlining Compliance, Boosting Efficiency and Optimising Data Analysis Using APIs</h2>An <a href="https://thisisme.com/resources/application-programming-interface" target="_blank">Application Programming Interface (API)</a> is a type of software that allows different applications to connect and communicate. APIs have immense utility within AML/CFT programs, due mainly to their immense flexibility. APIs can be used to streamline compliance routines by connecting customer identification software to monitoring tools, or integrate <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessment</a> tools with customer risk profiles to quickly generate risk profiles.&nbsp;<blockquote>“Respondents to the Digital Transformation questionnaire mentioned APIs among the most used and relevant solutions to the identified money laundering and terrorist financing problems.”</blockquote>Tasks that require the processing of large data sets – such as <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessments and analysis</a>, <a href="https://thisisme.com/resources/customer-due-diligence-ccd" target="_blank">customer due diligence</a>, and transaction monitoring – can all benefit significantly from new AML/CFT technologies like APIs. &nbsp;<blockquote>“APIs allow integration to happen much more quickly and with much larger datasets. This is particularly relevant as one of the most difficult challenges for many financial institutions is the integration of many different and often incompatible systems, including legacy technologies and specialised tools, created by different developers.”</blockquote>By streamlining administration and freeing up human resources, technologies like APIs have addressed the labour-intensive process of regulatory compliance that originally plagued FICA compliance.&nbsp;<h2>The Road Forward – Public and Private Sector Cooperation&nbsp;</h2>Cooperation has thus far paved the way for widespread innovation and the transformation of AML/CFT compliance.&nbsp;<blockquote>“Increased communication and cooperation between the public and private sector, informed by the type of information and analysis provided by this report, together with an emphasis on responsible adoption of new technologies and effectiveness, in particular with regard to data protection regulations, will be key to overcoming these challenges and fully realizing the promise of responsible innovation to strengthen the effectiveness of AML/CFT measures."</blockquote>By combining public sector legislation with private sector technological innovation, South Africa has been able to modernize its economy and actively move towards a secure economy based on transactional security. Today, businesses no longer have to choose between lower costs, improved efficiency, and world-class customer experience. When ensuring regulatory compliance, businesses can have their cake and eat it too.&nbsp;<h2>Enhanced Due Diligence, KYC and Identity Verification Services South Africa</h2><meta charset="utf-8">As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp; Citations&nbsp;<ol><li>PwC. Global Economic Crime and Fraud Survey. 2020. </li></ol>

Understand how and why private sector innovation has transformed and continues to enrich AML/CFT regulatory compliance for businesses.

Why the RegTech and FinTech Industries are Fundamental to AML/CFT

Over the last decade, innovative private sector solutions to AML/CFT regulatory compliance demands have enabled businesses to revolutionize the experience they provide to their customers. In recognition of this progress, a report by the FATF report discusses how innovations by the FinTech and RegTech industries stand to further enhance regulatory compliance for businesses, risk management, and customer experience.&nbsp;<h2>A Pervasive Threat – Money Laundering and Economic Crime&nbsp;</h2><a href="https://thisisme.com/resources/Anti-Money-Laundering" target="_blank">Money laundering</a> – the “cleaning” of criminal revenue to disguise its illegal source and facilitate its use in legitimate, everyday activities – has become a major concern for the vitality of our global financial system. A 2020 report by Deloitte estimated that money laundering makes up 2-5% of the global GDP (as much as $2 trillion). Pieter Alberts, senior operations manager at the Financial Intelligence Centre, estimated that South Africa is losing between $10 billion and $25 billion annually in illicit financial flows. Combating money laundering is therefore vital to secure and maintain the integrity of the global financial system.&nbsp;However, the web of legislation designed to combat money laundering and financial crime has historically created new compliance challenges for businesses, while also undermining the customer experience. By recognizing and tackling the challenges facing businesses, the Fintech, Regtech and Suptech industries have driven innovation and transformed <a href="https://thisisme.com/resources/AML-CFT-Regulations" target="_blank">AML/CFT compliance</a>.&nbsp;<h2>Customer Satisfaction – The Utility of New Regulatory Technologies&nbsp;</h2>The Financial Action Task Force (FATF) – an intergovernmental organization that is widely recognized as the global leader in anti-money laundering (AML) policy – published a report on the opportunities for new technologies to enhance the AML/CFT compliance process.&nbsp;“CDD procedures are among the main sources of dissatisfaction for customers. The process of collecting and verifying information is often difficult and strenuous, filled with endless requests for documents and additional in-person periodic evidence submissions” – FATF report.Historically, effective compliance with AML/CFT legislation has been soured by its negative impact on customer experience. <a href="https://thisisme.com/resources/know-your-customer" target="_blank">Know Your Customer (KYC)</a> requirements for the provision of identity documents and extensive paperwork were unpopular because of how time-consuming they were – the term “FICA” quickly became synonymous with bureaucratic inefficiency.<blockquote> “The enhanced use of technologies, for client screening and matching, holds great potential to improve the compliance processes” – FATF report.</blockquote><h2>FICA Compliance – A Transformed Customer Experience</h2>South Africa’s implementation of the Financial Intelligence Center Amendment Act (FICA) is a perfect example of how private sector innovation transformed AML/CFT compliance.Initially, FICA compliance cost businesses time and money by forcing them to engage in inefficient and lengthy administration that consumed human resources. The labour-intensive process of ensuring compliance also contained many moving parts that rendered it vulnerable to non-compliance or fraud. For customers, FICA compliance entailed complex paperwork and time wasted in a bank queue.However, in 2017, ThisIsMe transformed the South African RegTech industry by cutting FICA compliance from two weeks down to three minutes – an achievement that got the company featured as one of the Emerging 50 Rising Stars on 2018’s FINTECH100 list.&nbsp;Today, FICA compliance is automated: consumers can do it from the comfort of their homes and receive near-instant verification on the necessary identification documents. Businesses have been able to streamline and automate their regulatory compliance procedures by using integrated <a href="https://thisisme.com/resources/application-programming-interface" target="_blank">Application Programming Interfaces (APIs)</a>, saving time and money in the process.&nbsp;<h2>Enhanced Risk Assessment and Risk Management&nbsp;</h2>A comprehensive <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk assessment and risk management</a> approach to <a href="https://thisisme.com/resources/customer-due-diligence-ccd" target="_blank">customer due diligence</a> can further enhance customer experience. By using a tailored approach to risk, businesses can reduce due diligence requirements for individuals that are identified as being low-risk.&nbsp;“Innovative technology-based solutions – both digital ID and AML compliance transaction monitoring tools - can facilitate more accurate and up-to-date risk assessments at an optimised cost and provide greater confidence in the conclusions of that risk assessment, enabling greater use of simplified due diligence where appropriate” – FATF report.&nbsp;Greater detail and accuracy in risk assessments save time and money by allowing businesses to conduct <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">enhanced due diligence</a> that is appropriate to the level of risk posed by an individual. This not only saves the business time and money but also provides a better customer experience.&nbsp;<h2>Compliance Optimisation – Have Your Cake and Eat It Too&nbsp;</h2>These use cases of new technology enhancing customer experience demonstrate how private sector technological innovation has created a healthier compliance environment for businesses and consumers alike.&nbsp;“Increased communication and cooperation between the public and private sector… will be key to overcoming these challenges and fully realizing the promise of responsible innovation to strengthen the effectiveness of AML/CFT measures” – FATF report.By combining public sector legislation with private sector technological innovation, South Africa has been able to actively move towards a modern economy based on transactional security. Today, businesses no longer have to choose between lower costs, improved efficiency, and world-class customer experience. When it comes to ensuring regulatory compliance and providing a superb customer experience, businesses can have their cake and eat it too.&nbsp;As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business and its customers, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.&nbsp;<div> </div>

How private sector innovation has enabled businesses to overcome compliance challenges and provide world-class customer experiences.

How Regtech AML/CFT Innovation Has Transformed Customer Experience

<h2>How to Secure the Tech Sector Against New External Threats and Fraud</h2>PwC has released its&nbsp;<a href="https://www.pwc.com/gx/en/services/forensics/economic-crime-survey.html">2022 Global Economic Crime and Fraud Survey</a>. The survey – encompassing 1,296 executives across 53 countries and regions – highlights the changing threat landscape of economic crime and explores why the technology, media and communications industry is the only sector to experience a rise in economic crime.<h2>Technology Industry Suffers Greater Economic Crime</h2>In PwC’s most recent survey, the share of organizations that experienced an incident of economic crime has declined from 49% in 2018 to 46% in 2022. This represents a 3% decline in incidents of economic crime over the last six years, despite a myriad of destabilizing events such as the Covid-19 pandemic.<o:p></o:p>However, across the world, the Technology, Media and Communications (TMT) industry defies this trend by suffering an increased incidence rate. In PwC’s survey, 69% of respondents from the industry reported experiencing an incident of economic crime in the last 24 months – an incidence rate that far exceeds that of all other industries.<blockquote>“The growing maturity of the technology, media and telecommunications sector helped it identify a significant increase in fraud activity since 2020 with nearly two-thirds of companies experiencing some form of fraud, the highest incidence of all industries” –&nbsp;PwC Report</blockquote>Why is this, and what can be done to reverse the trend?<h2>A Changing Threat Landscape</h2>Predictably, cybercrime dominates the TMT industry and features in 50% of economic crime incidents. What is notable, however, is the TMT industry’s high incidence rate of customer fraud, which featured in 35% of all incidents of economic crime, making it the industry’s second most common type of economic crime.<o:p></o:p>Although daunting, the issue of customer fraud can be addressed. While other types of economic crime such as bribery and corruption are far harder to tackle, customer fraud is one where “dedicated resources, robust processes, and technology have proven effective in prevention”.&nbsp;<a href="https://thisisme.com/resources/identity-verification" target="_blank">Identity Verification</a> tools such as <a href="https://thisisme.com/resources/know-your-customer" target="_blank">Know Your Customer (KYC)</a> protocols have proven to be effective, and their widespread implementation is vital to curb the threat of customer fraud. To find out how ThisIsMe can secure your business against customer fraud, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>.On a broader scale, the rise of customer fraud is representational of the changing threat landscape for economic crime. External threats now dominate and external perpetrators have replaced more traditional internal threats.&nbsp;Of the most serious/disruptive incidents of economic crime experienced by the surveyed companies:<ul><li>43% are committed by external perpetrators (a 2% increase compared to 2020)<o:p></o:p></li><li>31% are committed by internal perpetrators (a 7% decrease compared to 2020)<o:p></o:p></li><li>26% of incidents are collusion between internal and external perpetrators (a 5% increase compared to 2020).<o:p></o:p></li></ul>In total, 69% of all the fraud experienced involved an external perpetrator.These changes in the threat landscape signal an urgent need for businesses to reassess how they guard their perimeters against external threats in order to secure business transactions.<h2>Why is the Technology Sector Being Targeted?</h2>PwC noted that the TMT sector’s highly digitised nature, combined with its high perceived value, are major drivers of its higher rates of economic crime.&nbsp;Notably, annual global company revenue is a good predictor of customer fraud risk. The higher the global revenue of a company, the higher the incidence rate of customer fraud. For companies with annual global revenues of more than $10 billion, customer fraud was the number-one type of fraud experienced. For all companies with annual revenues of less than $10 billion, customer fraud was the second most common type of fraud experienced, behind cybercrime.<o:p></o:p>A&nbsp;<a href="https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/corporate-finance/deloitte-uk-economic-crime-technology.pdf">report</a>&nbsp;by Deloitte also discussed several reasons why the technology industry faces a higher risk of economic crime compared to other industries. These factors include the technology sector’s identity as an emergent and disruptive environment, its significant amounts of intellectual property, and a constantly evolving regulatory environment that typically lags behind a rapidly changing threat landscape. In addition, the industry’s high level of interdependence between technology businesses creates a myriad of opportunities for fraud and breaches of sensitive information – an issue that is especially threatening for the TMT industry, given its handling of massive amounts of sensitive personal information.&nbsp;&nbsp;<h2>The Technology Sector as a Trusted Institution – Balancing Public Expectations with Risk</h2>PwC’s 2022 Global Economic Crime and Fraud survey highlights the extent to which business partners constitute external threats of economic crime. When ranked by the percentage of economic crimes that they account for, the most common types of external perpetrators are:<o:p></o:p><ul><li>vendor/supplier (4th, accounting for 20%)<o:p></o:p></li><li>agent/intermediary (5th, accounting for 15%)<o:p></o:p></li><li>joint venture/alliance partner (6th, accounting for 12%)<o:p></o:p></li><li>shared service provider (7th, accounting for 12%)<o:p></o:p></li><li>and consultant/advisor (8th, accounting for 10%)</li></ul><o:p></o:p>Business partners of various kinds represent a significant threat of economic crime. This is especially noteworthy for the TMT industry because, as noted by Deloitte, the industry relies on a large amount of interdependence between businesses. This interdependence increases the risk of economic crimes such as business partner fraud, procurement fraud, cybercrime, or data leakages.In comparison to other industries, the technology industry has a lot to lose from economic crime because it possesses a unique asset: trust. Edelman’s 2022&nbsp;<a href="https://www.edelman.com/trust/2022-trust-barometer">Trust Barometer</a>&nbsp;– a global survey that analyses public trust in institutions – revealed that the technology sector has become the most trusted industry in the world, with 74% of respondents trusting the industry to “do what is right”.The more specific concept of digital trust (a central concept for the technology industry) relates to whether or not stakeholders can trust that their information is secure, as well as customers being able to trust that cybersecurity is a priority and that their transactions, information, and personal data are all correct, secure, and private.The costs of breaching trust are severe. According to a study by Deloitte, 85% of respondents were very or fairly likely to sever an existing relationship with an organization if it does something that negatively impacts trust.&nbsp;Furthermore, case studies of three global companies that were embroiled in scandal lost 20-56% of their market cap relative to their peers over a period of three months to two years and fell behind the comparable industry index by 26-74%.As is the case with businesses operating in the technology, media and communications industry, widespread reliance on business partners increases the risk of harmful crime. While data leakages and other forms of economic crime can cause significant financial loss, they may also inflict a significant and widespread loss of consumer and stakeholder trust that can cause irreparable reputational harm.Considering these risks, businesses within the technology, media and telecommunications industry must secure their business partner relationships using trusted identities that can verify the integrity of those they do business with. Alarmingly, however, PwC’s 2020 Global Fraud and Economic Crime Survey noted that 24% of respondents had no third-party <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">due diligence</a> or <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk monitoring program</a> whatsoever. These shortcomings must be addressed if businesses want to reduce operational risk and address the rising threat posed by external perpetrators of economic crime.<h2>Identity Verification and Data Validation – Combatting the Threat Posed by External Actors</h2>The pervasive and increasing threat posed by external perpetrators of economic crime necessitates a renewed focus on the utility of <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification</a> and information validation tools to protect businesses against external threats.<o:p></o:p><a href="https://thisisme.com/resources/know-your-business" target="_blank">Know Your Business (KYB)</a> protocols like director lookups, business registration checks and <a href="https://thisisme.com/resources/account-verification-service" target="_blank">Account Verification Services (AVS)</a> are all tools that can ensure transactional trust and offer peace of mind by affirming the integrity of those we do business with. These tools – coupled with a <a href="https://thisisme.com/resources/risk-based-approach" target="_blank">risk-based approach</a> to due diligence – have the potential to address the rising threat posed by external perpetrators of economic crime.As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team&nbsp;<a href="https://thisisme.com/contact-us" target="_blank">here</a>. Citations<ol><li>PwC. Global Economic Crime and Fraud Survey. 2020. </li><li>Edelman. 2022. Trust Barometer. </li><li>Deloitte. 2021. The Chemistry of Trust, Part 4. </li><li>Deloitte. 2021. The Chemistry of Trust, Part 2. </li><li>Deloitte. 2021. The Chemistry of Trust, Part 1. </li></ol>

Why has the technology industry suffered higher rates of economic crime, and how can the industry guard against evolving external threats?

Securing the Technology Industry Against Evolving External Threats

Understand the operational risk of third-party business relationships and why enhanced due diligence is indispensable for suppliers.

How to Minimize Operational Risk with Supplier Due Diligence

<cite>Sub-5-minute read </cite><h2>The Rise in Economic Crime and the Decay of Trust </h2>Trust – understood as “our willingness to be vulnerable to the actions of others because we believe they have good intentions and will behave well towards us” – is the fabric that binds societies and economies together and ensures they can function well. The Covid-19 pandemic demanded more societal trust than ever before as people and businesses came together to overcome mutual challenges. However, this demand for trust between individuals, businesses, and project stakeholders was often betrayed as criminals exploited people’s vulnerabilities for personal gain. Economic crime exploded during the pandemic and types of <a href="https://thisisme.com/resources/social-engineering" target="_blank">social engineering</a> fraud reached record levels. This sharp rise in economic crime during the pandemic holds key lessons for combatting such crimes in the future. If we want to foster a stronger, more trusting post-pandemic economy, learning from Covid-19 is not an option; it is a necessity. <h2>Identity Fraud, Phishing Scams, and the Abuse of Vulnerability</h2>The speed, unpredictability and consequences of the pandemic profoundly shook many people’s sense of safety and economic security. As noted by SABRIC’s 2020 <a href="https://www.sabric.co.za/media/20oouwbg/sabric-annual-crime-stats-2020.pdf">report</a> on cybercrime, “social vulnerabilities resulting from fear and confusion caused by the pandemic and adjusting to lockdowns were exploited by criminals”. Phishing scams – a form of social engineering that tricks people into handing over sensitive information by exploiting the trust people place in authority – spiked to record levels during the pandemic. As cybersecurity systems become uncrackable, this exploitation of trust is becoming more profitable – social engineering has become the primary method employed by criminals when targeting victims across digital channels.1SIM swap fraud, which is nearly always committed by phishing scams, increased by 91.35% in 2020 compared to 2019. In addition, over 92% of all mobile banking fraud was committed using SIM swapping, representing losses of over R42 million. Due diligence services that can detect incidents of SIM card swapping, such as ThisIsMe’s SimSwap service, are central to curbing this threat.Shockingly, Business Email Compromise (BEC) scams saw a 30% increase in the first 100 days of the pandemic.2 The chaos created by the near-instantaneous shift to online communications at the start of the pandemic – combined with the lack of verified identities online – made it easy for fraudsters to exploit the disarray and phish for information using (BEC) scams. When conducting BEC scams, fraudsters impersonate trusted authority or business partners and send fraudulent emails that are designed to trick employees into giving away sensitive information or sending the criminals money. In the US alone during 2020, the FBI reported adjusted losses from BEC in excess of $1.8 billion.3Social engineering fraud is only possible in the absence of verified identities; conversely, <a href="https://thisisme.com/resources/identity-verification" target="_blank">identity verification</a> is the solution to such fraud. To find out how ThisIsMe can help you rebuild trust with verified identities, contact our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>. <h2>Business Partner Fraud – Vendor Due Diligence and Supply Chain Risk Management </h2>As the world battled Covid-19, criminals exploited the immense demand for PPE and other medical supplies. Mirroring global trends, the United States reported that non-delivery fraud, price gouging, securities fraud, misbranded products and identity fraud were alarmingly common at the height of the pandemic.4In South Africa, <a href="https://www.youtube.com/watch?v=I8ZkpS-xMG4&amp;ab_channel=CarteBlanche">investigations</a> revealed how, during the height of the pandemic, fraudulent buyers fooled insufficient due diligence checks and scammed PPE suppliers out of millions of Rands of stock. These examples of business partner fraud are not isolated. PwC conducted a survey of 245 South African business respondents (174 of which were C-Suite). Respondents were asked to identify the external perpetrator responsible for the most disruptive economic crime incident in the last two years. 18% of respondents cited vendor/supplier, 15% cited joint venture/alliance partner, and 13% cited consultant/advisor. Combined, these three groups – all categorized as business partners of some form – were responsible for 46% of the most disruptive economic crimes against the responding businesses. Shockingly, however, 24% of respondents to PwC’s report had no third-party <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">due diligence</a> or <a href="https://thisisme.com/resources/risk-assessment" target="_blank">risk monitoring program</a> whatsoever, even though 20% of respondents cited vendors/suppliers as the perpetrator of their most disruptive financial crime incident. If businesses want to operate in an environment free from crippling distrust, this discrepancy must be addressed, and comprehensive vendor due diligence procedures adopted. <h2>Fraud Risk Management with Enhanced Due Diligence </h2>Fraud committed by a business partner is a devastating event. Of all South African respondents to PwC’s survey, 1/3 cited distrust as being the most significant emotional impact of such incidents. Of those organizations that had reported experiencing economic crime, nearly one in five South African respondents cited that they had also been accused of committing an economic crime. When assessing the likelihood of who would point the finger, 44% were competitors, 43% were employees, and 31% were customers. Only in a quarter of incidents did a regulator make the accusation.6 This growing culture of finger-pointing highlights the damaging effects that distrust (caused by economic crime) has on an economy.The years following the pandemic will be characterized by economies rebuilding and recouping the losses suffered during the pandemic. However, by undermining the faith we place in our transactions, pervasive fraud sows distrust and makes us shy away from investment – a pattern that has been proven to slow economic development.7 Restoring this trust is therefore crucial if we want to foster a strong economy in which people feel empowered to transact without suspicion or the fear of debilitating losses from economic crime. To manage the risks of fraud, <a href="https://thisisme.com/resources/enhanced-due-diligence" target="_blank">enhanced due diligence</a> procedures must verify the identities of business partners to validate company registration details and the identities of the company directors.<h2>Restoring Trust with Identity Verification Services </h2>Trust, which is so fundamental to the well-being of societies, economies and nations, has been in decline for years. We are more suspicious of businesses, government and each other than ever before.8 The share of the global population that felt like most people could be trusted has fallen by 20% over the last 15 years.9<blockquote>“Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time” – Kenneth Arrow, Nobel Laureate for Economics.</blockquote>By undermining the faith we place in our transactions, pervasive fraud sows distrust and makes us shy away from investment – a pattern that has been proven to slow economic development. Restoring this trust is therefore crucial if we want to foster a strong economy in which people feel empowered to transact without suspicion or the fear of debilitating losses from economic crime. Although it is essential to start rebuilding this trust, it is naïve to simply ask people to trust one another. The risk of loss is too high. Trust must be rebuilt on <a href="https://thisisme.com/resources/identity-verification" target="_blank">verifiable identities</a> that can offer peace of mind by affirming the integrity of those we do business with. As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience our full suite of advanced due diligence services, book a demonstration by contacting our team <a href="https://thisisme.com/contact-us" target="_blank">here</a>. Citations<ol><li><meta charset="UTF-8">SABRIC Annual Crime Statistics 2020.&nbsp;</li><li>Mimecast. The State of Email Security 2020. </li><li><meta charset="UTF-8">Federal Bureau of Investigation. Internet Crime Report 2020.&nbsp; </li><li><meta charset="UTF-8">Congressional Research Service. “Covid-19 and Emerging Global Patterns of Financial Crime”. 2020.&nbsp; </li><li><meta charset="UTF-8">PwC’s 2020 Global Economic Crime and Fraud Survey. </li><li><meta charset="UTF-8">PwC’s 2020 Global Economic Crime and Fraud Survey. </li><li><meta charset="UTF-8">Conal Smith. “Trust and Total Factor Productivity: What Do We Know About Effect Size and Causal Pathways?”. 2020. </li><li>Edelman Trust Barometer 2021. </li><li>Deloitte. The link between trust and economic prosperity. 2022. </li></ol>

As we rebuild after the pandemic, identity verification, enhanced due diligence and supply chain risk management are crucial to fight economic crime.