Remittance, defined as a sum of money given–especially by mail, or not in person–in exchange for goods or services, or as a gift, is the hallmark of every business. In the past, before the Information Age changed life as we knew it, money mostly changed hands in physical form–through cheques and cash. Today, with the proliferation of technology and online networks, remittance has gotten far more complicated, requiring multiple new regulations and rapid technological innovations to protect sellers and buyers against fraud.
Methods for Know(ing) Your Customer (KYC) is changing: How recent world history has led to the introduction of the newest KYC measures
Today’s remittance regulations are often an effect of previous abuses and problems. For instance, when Sani Abacha, the former president of Nigeria, used associates and family members to launder funds in the late 1990s, the politically exposed person (PEP) list was introduced to deter future corrupt political figures from hiding or moving ill-gotten proceeds.
After the September 11, 2001 terrorist attacks in New York, the USA’s PATRIOT Act included Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) provisions to prevent other terrorists from following in the footsteps of the September 11 attackers, who used loopholes to open bank accounts with fake data such as illegitimate social security numbers.
Australia, too, created the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006, administered by the Australian Transaction Reports and Analysis Centre (AUSTRAC), which in 2017 was expanded to cover non-financial businesses including Digital Currency Exchanges. As terrorists and other criminals continue to threaten the integrity of the financial system, business people and citizens wishing to utilise innovative financial services will need new regulations and technology to evolve to meet the need for integrity and security.
What to expect in the world of remittances
Proper protection requires action on the part of consumers, businesses, and regulatory agencies. Businesses will need to adopt methods such as device fingerprinting and watch list screening, as part of their KYC practices, as well as other measures prescribed by regulatory agencies based on current need. As KYC becomes more robust, there is a danger of customer abandonment, so a healthy balance between strong KYC practices and efficiency or convenience is necessary for successful client onboarding.
As international migration and economic growth are predicted to increase in the next few years, remittance is expected to increase as well. Because online remitters cannot meet clients in person, other measures must be put in place to facilitate safe and successful remittances.
The future of remittance compliance could include:
Biometrics, such as facial recognition, liveness detection (which uses eye blinks to ensure that a real person, not a computer bot, is involved in the transaction), and voice biometrics (a technology that checks a customer’s voice using pitch, frequency, spectral magnitudes, and other factors) amongst other biomarker scanning techniques, are effective ways to validate users. Biometrics can be easily incorporated into electronic and smart devices and are already being used in some countries.
Other remittance safety measures include blockchain technology. Because blockchain allows digital information to be distributed but not copied, blockchain allows the formation of new kind of internet. It is robust and incredibly difficult to hack, and provides great potential for the future of remittance.
Modern technology is also making remote KYC validations possible and effective, which will greatly enhance user-experience by making services far more convenient and cost-effective. While in-person KYC relies on the human operative and may result in human error, remote KYC can actually be even more effective and accurate. Some examples of remote KYC may include fully-remote mobile KYC involving biometric verification technologies or videoconference KYC implementation.
Regulation of remittances usually comes as a response to an unpleasant event or abuse of the existing system. However, in the future, remitters and regulators are expected to be more proactive, to anticipate and prevent incidents before they happen. Remittance will always be the cornerstone of the business world and the wider world, and by taking the proper steps, remitters and regulators can help create a safe and level playing field for all parties involved.