Using Social Media for Customer Due Diligence and Beneficial Ownership Identification
Despite all of the recent controversy surrounding the Facebook brand and their now infamous data breach affecting upwards of 87 million people across the globe, social media as a whole continues to thrive. In today’s tech-centered world, the use of smartphones and other highly capable devices for the promotion of social, economical, and intellectual status has become an almost obligatory part of life, leaving those who have failed to stay ahead of this curve in the dust – and quickly at that. The need to share posts, connect, and yes…”tweet” alongside friends, family, acquaintances and complete strangers from far and wide has become ingrained into our daily lives, so much so that those failing to partake in this “liberating” experience are now viewed as outsiders to some extent. The true magnitude of what the 21st century social experience has become is demonstrated via the shear number of platforms available for download in app stores and on computers today. For every Instagram, Twitter, and Facebook, there are tens of other [lesser] options offering users a variety of unique experiences (i.e. local meet-ups, buy and sell, etc.). Platforms such as LinkedIn allow professionals to network with one another, find jobs, and create other opportunities with just a few clicks of a mouse. A few years ago just the thought of this would have been unfathomable. Today it is blossoming before our eyes. Regardless of one’s personal opinions on whether technology and social media are hindering the growth of young minds and abolishing face-to-face human interaction, the possibilities presented to anyone with internet or cellular access are undeniable. Outside of social networking, we have already seen fast-paced development in the ever-advancing role that technology and artificial intelligence (AI) has begun to play in the financial sector. The amazing part about this is that while rather influential even in its earliest stages, we have only begun to scratch the surface of what is possible, specifically in the regulatory compliance space.
While it may be difficult to find a correlation between social media and anti-money laundering/counter-terrorist financing campaigns at the initial glance, social media activity is beginning to play an increased role in customer due diligence (CDD) practices performed by financial institutions and other professional organizations on a daily basis. While still relatively untapped, suspicious activity can be spotlighted through social media activity, an individual’s posts, and even the basic information being added to their respective profiles. In locating each of these accounts, an institution can essentially create a web of personal information on an individual that can be checked against the information they have provided to a financial institution. Take for example an individual attempting to open an account for his business in New York City, yet both his Facebook and LinkedIn profiles show that he works out of San Francisco for an established multinational corporation. This should raise a red flag during the account opening process, and this person should be subjected to a fair amount scrutiny over this and all of the additional information he has presented to a financial institution. The information accrued on one’s social media accounts can, and should, in turn be checked across each of the other social media platforms they are members of. Similarly, if a company selling a series of lifestyle products is trying to open a certain class of account based on their prospective earnings and brand-following expected in the coming year, yet they are not actively using social media to gain such a following and/or to advertise their product(s), this too should raise eyebrows within the involved bank.
In addition to its uses for screening of new customers, studies have been performed analyzing financial operations within companies from across the globe, where metrics from social network sites have been utilized to successfully create risk profiles on potential clients. This activity has led to the ability to predict certain clusters of individuals who may potentially pose legitimate threats to the reputations of financial institutions and the financial security of their customers, findings that can save a bank valuable time and funds in the long run. Furthermore, the introduction of these practices for use on existing clientele should in theory also have a positive effect on the results of AML investigations, helping institutions to mitigate risk and avoid costly penalties. Some regulatory bodies have already begun to employ these measures, albeit for different reasons. Regulators across the globe are now actively scrutinizing the social media activity of citizens whose transactions may have previously attracted their attention. The Financial Transactions and Reports Analysis Centre (FINTRAC) is one regulatory body doing exactly this, using the online presence of criminals and fraudsters to thwart illicit activity and fundraising efforts of terrorist groups. The Canada Revenue Agency has done the same, using social media posts, specifically those found on Facebook, to monitor potential tax evasion suspects. While some have viewed this as an invasion of privacy, these practices are 100% legal and are proving an effective means for collecting valuable information on potential customers.
While the use of social media screening for the promotion of financial security is still a work in progress, large-scale adoption of these procedures are expected, as is the continued refinement of this promising and impactful practice. Global RADAR for example has provided financial institutions the ability to capture social media elements through their client onboarding solution, allowing organizations to perform a higher quality review as part of their customer due diligence process when prospecting or meeting new customers. While social media analysis has played an active role during investigation processes initiated by investigation units within compliance and fraud departments, this is being carried to the front line, allowing institutions to be proactive when onboarding clients rather than re-active.
To learn more about social media and the impact on the customer due diligence process, register for Global RADAR Check and see first-hand how the review of social media information can impact the customer due diligence and enhanced due diligence process. Simply register and try Global RADAR’s Ownership Mapper for free.