Live biometrics checks ‘the only way’ to prevent identity scams in finance

In a recent podcast from PaymentsJournal, Micheal Sheehy, chief compliance officer at payments firm Payoneer, pointed to large-scale recent fraud cases such as the Equifax data breach, Covid unemployment scams, and PPP loans, saying that it has “really become obvious that the only way to prevent this fraud is a live biometric check.”

The exec argued for the benefits of mixing biometric data with digital identity highlighting how a government database can be used to access digital IDs and by “cross-checking it with a biometric test, you can tie the two of them together.”

Sheehy also pointed out how some Asian economies are fairly far ahead of the West when it comes to implementing biometrics for fraud prevention.

“Singapore and Malaysia have actually mandated biometrics in their KYC,” he explains. “They’re telling the financial institutions in those markets, if your customers are not in front of you when you’re selling financial products, you need to have a liveness and KYC check.”

He added: “They go so far as to claim that they will not accept identity theft as a typology within their economy anymore.”

During the podcast, Sherry also expressed his desire for a more government-led approach to ensuring biometric authentication takes root in the U.S.

“Right now, regulation of biometrics is at the state level,” he argues. “We need more of a federal mandate, which I believe is coming.”

“Until then, it’s kind of the Wild Wild West.”

The exec said he feels these regulations could come as part of the upcoming Consumer Data Privacy Act, which is currently being put together by U.S. Congress.

In addition, Sheehy points to how he feels biometric technology has improved in the past few years, saying we have seen a “significant change” over the past half-decade, from then consumers “were just taking pictures of their IDs and uploading them and applying for mortgages.”

Focus on biometric authentication grows

Biometric authentication of financial services to improve security is also picking up support elsewhere. An article in the Taiwanese publication Taiwan News highlighted some benefits of biometrics for these use cases.

The article pointed to benefits such as increased protection from social engineering or guesswork attacks, as well as more convenience for consumers who do not want to use lengthy passwords, as well as a higher level of consumer trust.

The news comes as public sector bodies in the UK are acknowledging the potential role of crypto transfers in economic crime.

A recent report by the UK’s Crypto and Digital Assets All Party Parliamentary Group has found that “growth of the cryptocurrency and digital asset sector, without comprehensive regulation, also presents considerable risks, particularly in terms of consumer protection, economic crime, and financial stability.”

In terms of the next steps outlined, the report urges the UK to capitalize on its “finite window of opportunity within the next 12-18 months” by establishing proper leadership with appoint of a “crypto Tzar,” who would address issues across departments and bodies to ensure proper implementation.

The report repeatedly acknowledged the role of crypto within economic crime but highlighted large potential benefits to the UK economy.

Recent news seems to have vindicated Sheehy’s point regarding Asian nations being further ahead when it comes to biometrics.

Thailand’s Deputy Government Spokesperson Traisuree Taisaranakul has said that all commercial and government banks will start to use biometric facial recognition as a security protocol.

According to reporting by regional publication Pattaya Mail, from July onwards consumers transferring over 50,000 baht via mobile banking accounts will need to use facial recognition to verify their identities.

The limitation will also apply to those who are transferring over 200,000 baht per day.

As per the reports, consumers who have not yet enrolled in the biometrics scheme may have to get in touch with their bank to add their facial scans.

Traisuree highlighted have this move is merely part of a basket of measures meant to shore up banking security in the nation, for example, consumers in Thailand will no longer be able to receive web links contained in text messages from their banks for security reasons.

Thailand has previously been quite forward-thinking when it comes to digital identity.

Back in January 2023 of this year, the nation commenced a pilot program that saw Thai citizens issued a digital ID via a mobile app.

Up to 10 million of these digital IDs are expected to be issued this year as per reporting by Bangkok Post and administrations have been told not to deny services to those using these digital IDs.

It is not just the West that is looking to shore up identity verification practices when it comes to crypto transfers.

Indian crypto exchanges, as per a report by the Economic Times, are currently working on a scheme that will prohibit crypto transfers unless the sender can reveal the identity of the private wallet receiving the transaction.

A ‘private wallet’ in cryptocurrency, is a wallet that is completely controlled by the owner, as opposed to a ‘public wallet’ where the crypto is held on an exchange such as Binance, Coinbase, or Crypto.com.

In India, as exchanges are forced by law to verify the identities of their users via KYC checks, the identities of those engaging in transfers between these public wallets can be verified.

However, under current law, this would not be the case if the transfer was made to a private wallet.

This latest move could potentially grant these crypto exchanges a degree of immunity as per The Economic Times, in the event of an anti-money laundering crackdown by the regulator.

The role of cryptocurrency within the world of money laundering has already been firmly established.

Internationally, cryptocurrency addresses linked to illegal activity sent almost $23.8 billion worth of cryptocurrency in 2022, according to a report by Crypto analytics firm Chainaysis, with a majority heading toward mainstream exchanges.

Article Topics

AML  |  biometric authentication  |  biometric liveness detection  |  cryptocurrency  |  face biometrics  |  financial services  |  identity verification  |  KYC  |  regulation