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Know Your Investor Services – Helping Businesses Avoid Investment Fraud


Sep 12, 2023
Investment Fraud

In the modern world, innovative digital solutions are streamlining financial operations. but fraudsters are also using sophisticated ways to commit crimes. The investment sector is a vulnerable industry that cybercriminals can exploit for their advantage. In this light, investor onboarding has become challenging for investment firms because cybercriminals take advantage of the shortcomings in the system. 

According to CNBC, around 3 million consumers in the USA reported investment fraud, which resulted in a loss of approximately $6 billion. Investment firms are responsible for mitigating identity fraud and fighting money laundering and terrorism financing. Thus, know your investor services and AML solutions are powerful ways to deal with financial fraud in the modern world. 

Gaining Insight Into the Know Your Investor Service

The investment industry must perform identity verification on the onboarding investing parties to discourage crimes, especially in the context of corporate investments. This is about implementing KYC checks to validate the financial track records and market profiles to deter bad actors. Know your investor verification services also ensures new stakeholders possess the necessary market experience for long-term business prospects.

Understanding Vulnerabilities in Investment Firms

Perpetrators have always wanted to exploit mainstream industries for instant rewards. In the context of vast amounts of cash flow and a lack of stringent guidelines, investment firms have attracted the attention of bad actors. According to a report in 2022, investment scams have increased by 42% in 2022 compared to the previous year. Furthermore, crimes like money laundering and terrorism financing have exacerbated the situation. 

For effective coping, investment firms & Fintech enterprises must implement the latest ID verification solutions. In this scenario, big investors feel demotivated and refuse to come forward. This is where the investment industry must implement the latest Know Your Investor measures. Hence, investor accreditation verification protocols are the only feasible solution to discourage criminals and fight money laundering cases.

Know Your Investor Solution – Helping Firms Meet AML Compliance

Rising terrorist cases have motivated global regulatory bodies to take the initiative against money laundering. In this light, the IMF has declared money laundering as a major source behind terror financing, which supports terrorism worldwide. Unfortunately, investment firms have become an accomplice in money laundering because fraudsters use such mediums to hide their black money.

According to a report, around $300 billion gets laundered annually, which strains the world’s GDP. In this light, global regulatory bodies have introduced strict protocols to discourage financial crimes in investment companies. Unfortunately, perpetrators target the industry to commit money laundering because the system does not have robust AML measures for fraud prevention. Thus, verifying potential investors helps investment firms mitigate business fraud risk.

Gaining Insight into Global Regulatory Standards for Know Your Investor Verification

All the responsible jurisdictions, international regulatory agencies, and other entities have highlighted the importance of implementing AML/KYI measures. In the context of rising criminal cases, legislators have introduced various laws & regulations to discourage criminals.

  • FATF

The Financial Action Task Force (FATF) has established comprehensive guidelines for jurisdictions to fight money laundering. Various areas have been added to the grey list & black list for non-compliance with given standards. FATF has declared that organized crime can damage financial institutions through fake investments. This scenario calls for ongoing monitoring of all such corporations. 

  • US

The USA has authorized the Federal Adviser Act (FDA) to restrict investment firms from onboarding new investing parties. In this light, any investing body having less than $1 million is not eligible for onboarding. 

Investment firms are responsible for registering security investments with the Security Exchange Commission (SEC) to monitor funds perpetually. 

  • UK

The Financial Conduct Authority (FCA) in the UK is responsible for regulating all investment firms. FCA has guided companies to execute investor verification measures to monitor the investing bodies and their source of funds. To streamline business operations, authorities issued the FCA Register, which facilitates ID verification of investing firms. 

The Bottom Line

According to global regulatory bodies, investment firms must implement know your investor verification solution to fight fraud and discourage bad actors. Working with competent service providers can offer state-of-the-art KYC & AML protocols for investment firms, which facilitate compliance with international regulations. By incorporating cutting-edge KYC & AML solutions, investment firms can monitor their business partners and investing parties.


Collaborating with a verified service provider can provide an AI-driven qualified investor verification solution that generates high-quality output. Implementing AML screening services cross-checks the data against global watch lists to discourage high-risk entities. This progressive approach performs validations in real-time with an unbeatable accuracy rate. 

By Admin

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