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ID authentication vendor seeing fewer financial fraud attempts in Africa

South Africa could be off 'Grey List' sooner with help
ID authentication vendor seeing fewer financial fraud attempts in Africa
 

ID fraud attempts are falling across Africa compared to the previous year, a new marketing KYC report from authentication firm Smile Identity.

Smile’s mid-2023 look at KYC in Africa states that the number of fraudulent KYC attempts that the company identified during the first half of this year was down 23 percent, five percentage points down from the drop experienced during the same period last year.

The company says the drop in attempts that it has identified indicates that the total number of fraudulent KYC attempts is falling across the continent.

The report is based on analysis of 75 million unique ID checks performed since 2018 by Smile ID, which recently renamed itself from Smile Identity.

The three IDs that are most targeted by fraudsters were the national IDs of Kenya, Nigeria and South Africa. The most common tactic was using stolen or lost IDs for KYC during onboarding.

Another interesting point from Smile’s report is the increase in African women using online verification. During the past two years, the portion of female ID verifications performed by Smile systems has grown from 10 percent in the third quarter of 2021 to 35 percent during the first half of this year, according to the company.

The company emphasized growth it is seeing in female verification in three sectors: buy-now, pay later, banking and lending and remittances, according to the company.

Smile’s report also provided an overview of digital identity initiatives across Africa, including Ethiopia’s enrollment for its Fayda national ID, Kenya’s decision to introduce a unique personal identifier and Uganda’s planned launch of a digital ID scheme in the last quarter of 2023.

The continent, however, is also facing challenges with global anti-money laundering watchdog, Financial Action Task Force adding more countries to its “Grey List,” which publicizes deficiencies in anti-money laundering and counter-terrorism financing regimes. This year, South Africa, Nigeria and Cameroon were listed.

Additions to the task force’s Grey List will “significantly impact the KYC ecosystem on the continent due to the growing number of countries on the list and the profile of countries now involved,” the report states.

In April, Smile bought Inclusive Innovations, parent of ID verification firm Appruve.

iiDENTIFii pitches liveness to African countries on ‘Grey List’

South African authentication and onboarding vendor iiDENTIFii claims that it is possible to reverse the country’s grey-listing by the task force in 18 months through broad implementation of liveness detection. South Africa was added to the Grey List in March and is expecting a review of the decision in January 2025.

Banks are among the most vulnerable institutions to money laundering, particularly in cross-border transactions, says iiDENTIFii. The company claims it was hired by three South African banks to fortify their digital identification and onboarding and is offering a defense against digital injection attacks.

“This is part of a wider banking strategy to protect companies and consumers against AML and fraud,” says Murray Collyer, iiDENTIFii’s chief operating officer. “Over the next 18 months, we believe the full impact of this solution will be visible and hopefully play a part in shifting the needle on the grey-listing decision.”

Collyer emphasizes the importance of liveness detection, as well as the difference between presentation attack detection and digital injection attack detection.

In September, the company secured US$15.2 million in a series A round to expand its face biometric authentication lines.

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