"Inquiring Trading Firms: What Strategies Can Be Employed to Combat Fraud While Retaining Clientele?"
Trading companies are under increasing pressure to scale in both existing and emerging markets, while simultaneously combating fraud and maintaining customer retention. In light of this challenge, a multi-layered strategy that combines robust Know Your Customer (KYC), Anti-Money Laundering (AML) compliance, and advanced technological tools is essential.
Key Measures in KYC, AML, and Technology
KYC and Customer Due Diligence (CDD)
To ensure compliance and detect illicit activities early, trading companies should conduct thorough customer identity verification using official documents and biometric authentication, such as fingerprint or facial recognition. Risk profiles should be assessed by screening for politically exposed persons (PEP), sanctions, and adverse media. Automated onboarding processes can be implemented for low and medium-risk customers, while high-risk profiles require manual review. Continuous monitoring of customers post-onboarding for unusual or suspicious behaviour is also crucial [2][4].
AML Compliance and Transaction Monitoring
Real-time transaction monitoring systems capable of detecting suspicious patterns or anomalies, with risk scoring to prioritize alerts, should be implemented. Monitoring frequencies should align with risk levels, with high-risk customers monitored daily and medium-risk customers monitored monthly. Comprehensive records and audit trails are required for regulatory reporting and potential investigations. Independent audits and updates to AML policies are necessary to stay compliant with evolving regulations [2][4].
Advanced Fraud Prevention Technologies
AI-powered fraud detection systems that analyze large datasets in real-time to identify anomalies and reduce false positives are essential. Real-time fraud monitoring can detect and stop fraudulent transactions before completion, while multi-factor authentication and biometric authentication methods secure accounts. Good customer profiling using AI helps reduce false positives, thereby minimizing unnecessary friction [1][3].
Customer Engagement and Education
Customers should be empowered as the first line of defence by educating them about common scam typologies and security best practices. Customers should be able to report suspicious activity easily via secure portals or mobile apps, supported by AI-based assessment tools. Customers should also be provided with customizable security controls, such as transaction limits or consent preferences, allowing them to tailor their protection without sacrificing convenience [3].
Balancing Fraud Prevention and Customer Retention
To minimise friction for genuine users, risk-based approaches that apply stricter controls only when necessary, supported by AI-driven accuracy improvements, should be employed. Leveraging “good customer” signals to reduce false positives prevents frustration and potential attrition from overly aggressive fraud blocking. Enhancing transparency and communication helps build trust without annoying customers with unnecessary hurdles [3].
In summary, trading companies should implement robust KYC/CDD protocols, comprehensive AML transaction monitoring, AI-enhanced fraud detection, and customer-centric risk management. Combining these with proactive customer education and engagement helps reduce fraud risk while maintaining a seamless, trustworthy customer experience that fosters retention [1][2][3][4].
Upcoming Q&A Session
This week, Pati Murtazalieva, the VP of Global Sales Operations, will discuss how trading companies can combat fraud while scaling and retaining clients. Questions can be submitted through Sumsub's Instagram and LinkedIn.
Trading is one of the most high-risk industries for fraud, money laundering, and terrorist financing. Juniper Research predicts $362 billion in losses from online payment fraud globally between 2023 and 28. Identifying the nature of customers and their portfolios, especially high-net-worth individuals and institutional investors, is crucial.
By implementing these measures, trading companies can effectively balance fraud prevention with customer retention, ensuring a secure and sustainable future in the competitive trading landscape.
- In the competitive trading landscape, where companies are under pressure to scale and retain customers, a multi-layered strategy that includes robust Know Your Customer (KYC), Anti-Money Laundering (AML) compliance, and advanced technological tools is vital for effective fraud prevention.
- To minimize friction for genuine users and maintain a seamless customer experience, trading companies should employ risk-based approaches that apply stricter controls only when necessary, supported by AI-driven accuracy improvements, and leverage "good customer" signals to reduce false positives.
