Earlier this month, we introduced our first major customer for Advisor by Digital CheckTM ”” a geolocation service that can pinpoint the physical whereabouts of a check scanner being used to make deposits. Since then, we’ve gotten a lot of questions ”” mostly along the lines of, “What an interesting idea – where did you get it?”
Quite simply, Advisor came about as a direct response to new scrutiny being felt by some of our client banks as regulators cracked down on terrorist funding, money laundering, and other types of suspicious transactions. Why now? Well, there wasn’t a formal announcement, or a sweeping new law passed. But a few years ago, the industry’s “Know Your Customer” (KYC) guidelines started becoming more strictly enforced ”” there wasn’t a lot of reaction at first, but once people started getting audited and having to answer questions, suddenly they came to the forefront.
Basically, if you are a bank accepting deposits from a company with other affiliates and clearing their checks, you’re accountable for any fraud, with no limit on either those losses or on penalties and fines that may come along with it. And if any money comes into the United States that is not accounted for, the bank of first deposit owns the transaction and everything associated with it, including all the liability. So with all the automation in place in payments today, combined with open-ended liability, there exists a recipe for disaster if you are processing transactions for someone and they happen to go through, only to come up later as fraud or illegal activity.
The only way to address this is to take the principles of KYC a step further ”” not only to “Know Your Customer,” but to know your customer at all times. Traditionally, you’d authenticate customers once, when they opened an account or signed up for a service, and then you/d send them on their way. But what if the customer opening the account was a seemingly legitimate business that passed all the initial screenings … then sent its scanner across the border to be used for who-knows-what? You’d be on the hook for whatever they did – fraud, prohibited transactions, or otherwise.
That’s where Advisor comes in; by using a combination of traditional IP location and proprietary secondary techniques, it can pinpoint a scanner’s position to within as little as 100 feet. So if it’s changed position significantly since its last use, or crossed a border, the transaction can be yellow-flagged for inspection, or red-flagged to stop until you can verify its validity. The software can be “pushed out” silently to scanners that are already deployed in the field, and works with any brand or model of scanner, Digital Check or otherwise.
As a matter of course, we have to remind you that Advisor is not a cure-all that will solve all types of fraud and money-laundering activity; it is best used as part of a comprehensive plan to prevent suspicious transactions.
As always, to find out more, contact your Digital Check account representative or contact us online.