Digital Identities in 2023: Trends and Updates
With the first months of 2023 already showing uncertainty in both financial and digital markets (re: Silicon Valley Bank and Credit Suisse), business leaders are looking for ways to stay on top of evolving trends and patterns of risks to mitigate the harm caused by money laundering (AML), fraud, and unintentional funding of criminal/terrorist activities (CFT).
As more users adopt digital identities and integrate virtual payment methods, platforms, and practices in their daily lives, global regulators are carefully monitoring trends and actively looking to implement standards that help to circumvent the risks associated with criminal corruption.
Below, we’ll take a closer look at some of the anticipated and notable trends expected in 2023 in the digital universe as online and virtual avenues continue to expand.
Full Speed Ahead
As mentioned above, there are no signs that the creation and usage of digital identities will slow down (quite the opposite, in fact). Digital identity verification has become a pressing issue for regulators as user “personas” become more prevalent in daily matters such as government verification, banking, healthcare, the workforce, and education.
With the identity verification market expected to be worth in excess of US$38.5 Billion by 2033 (source), it should not be a surprise to those in industries adjacent to or directly utilizing ID verification that it is highly likely global regulars and lawmakers will introduce new guidelines that aim to establish a universal understanding and standard of compliance for countries to follow.
The speed with which digital identities are being implemented in innovative ways not only opens the doors for groundbreaking societal and technological advancements but also opens the door to a world of unknown vulnerabilities that place citizens and organizations at risk. Compliance standards and KYC protocols (more on that below), continue to grow in importance as a result, making it essential for businesses and institutions to be ready to pivot as needed.
Did you know: iComply’s unique, modular suite of KYC programs makes it easy to stay compliant with fincrime mandates across the globe and can integrate into your existing frame in minutes?
Data Privacy and Security Concerns
Identity fraud has become one of the most prevalent forms of criminal activity in the digital sphere, causing significant harm to the individuals directly targeted, as well as funding illicit activities with stolen funds and assets. Protection against such crimes is crucial for the privacy and security of your most sensitive client data. In 2023, we expect to see an even more competitive security technologies industry as legislators and manufacturers seek to keep private data safely where it belongs, and out of the hands of nefarious users.
Increased Risk for Fraud
With more users adapting to digital lifestyles at such a rapid pace, inevitable gaps in our current security frameworks could lead to an increased risk for fraud. Ransomware, geo-targeted phishing, and cloud security breaches are expected to increase in 2023, with online banking and electronic transfers being particularly vulnerable. There is also considerable talk—with a growing number of AI advancements entering the spotlight—of concerns that machine learning (ML) could be used to manipulate user likenesses, generate new identity documents that might be harder to debunk upfront and other such issues that come with recent technological advancements. Integrated biometrics and a focus on refining Enhanced Due Diligence (EDD) will be essential to combat these risks.
Cryptocurrency and digital asset exchanges have been under close monitoring over the past several years, and 2023 is poised to implement several watershed regulations to help combat the risks and challenges presented by decentralized banking. In addition to the travel rule, the Markets in Crypto Assets (MiCA) regulation (not anticipated until 2024) puts additional safeguards in place to tie transactions to known persons and give institutions the ability to accurately assess and react to risk in real-time. The Travel Rule and MiCA are most likely the start of a long line of subsequent crypto and digital asset regulations that will continue to evolve—especially as global task forces keep an eye on new issues that come to light over time and as information technology enables new methods to counteract criminal intent proactively.
Stricter Compliance Enforcement
With such prevalent risks arising out of the rapid pace of technological advances and digital user adoption, the time has come for businesses and institutions across the globe to wholly embrace the fact that KYC and AML protocols are far from optional. Failure to comply with existing and future standards carries the threat of hefty fines and can place your client base in significant peril. To avoid the heavy repercussions that come with non-compliance, it is essential to routinely review your processes and protocols and to ensure that you are using the best software available to serve the unique needs of your business.
Stay Ahead of KYC Risks with iComply
At iComply, we know that the costs of non-compliance can be devastating. To help you mitigate risk and stay on top of current legislation, we offer a unique, end-to-end suite of KYC + KYB software that utilizes a modular platform that can be integrated into your workflow seamlessly with minimal downtime.
Learn how you can stay ahead of evolving AML and fraud standards, and discover why iComply is your leading choice for software solutions by talking to our team today!
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