When we say fraud is in every industry, we literally mean every industry. Nothing is safe from scammers and fraudsters and it is sad to say, the charity organizations and NGOs are also infested with them. It is hard to believe that such a pure and positive industry will be exploited by the fraudsters as well but it still happens. One of the major reasons for fraud targeted at charity organizations is that most charity organizations do not expect it. It does not even cross their minds that someone would try to take unlawful advantage of the nice deed they are performing and hence they do not take adequate measures like know your customer.
In this blog, we will highlight the threats that charities must take precautions of and how knowing your customer (KYC) verifications can play a part in eliminating fraud in such organizations.
Volunteering is a primary method on which charity organizations are dependent to operate. These organizations put every penny into the charitable cause that paying for staff to manage the operations could be a little too much for them. The organizations hire a huge number of volunteers to help the organization. However, there is a huge risk attached to the volunteers while onboarding them. Fraudsters can disguise themselves as volunteers by using fake identities and this could prove to be very risky while handling the funds or collecting door-to-door charities. Once the fraudsters have become a part of a charity organization using a fake identity, they can misuse its name to collect the funds illegally from people. Since they will be using fake identities, there will be no proper way to track them and the victim of the identity theft will end up facing the consequences. This type of fraud not only harms the organization financially but also harms its credibility and ruins the trust of the people to donate to it.
Fraudulent donors cheat charity organizations in two main ways. Through the first way, the donor reaches out to the charity organizations claiming to donate a huge sum of money. Once they have settled with the organization, the donor sends in the check through the mail. After a while, the donor contacts the charity requesting a partial refund of the charity or a full refund of charity. They ask for a refund by providing an emotional excuse of how some important expenses came up and the charity ends up returning the funds. This is usually done before the bank gets back to the charity that the initial check they deposited was fake. In addition to losing a large amount of money, the organization also has to submit the banking fee as well.
The second way donor fraud occurs through credit cards. The fraudster claims to donate a huge amount of money to charity with a condition that another foreign charity organization will receive a certain percentage of the amount. The foreign charity account is in reality the account of the donor. The credit card making the payments is usually a stolen card. Once the payments are done, the charity is left to face the chargebacks.
Know Your Customer to Ensure Integrity
Simple identity verification checks help charity organizations to deal with most of the fraud attempts. By verifying the identity of the donor and ensuring the credentials they are providing are legit can secure the organization. If the donor is really who he says he is, the organization can track down the donor if any fraud is attempted. The credit card credentials matched against the identity check also helps a lot. All these identity checks fall under the AML KYC compliance. Know your customer regulation requires all organizations including charity organizations to verify the identity of any person or business they are making deals with, especially monetary deals.
Some of the charity organizations counter that this system of knowing your customer is only applicable for walk-in charities and not the online system of charities. However, they are far from right here. The new AI-powered identity verification software has made it possible to perform know your customer remotely. The system can perform online document verification, online face verification, and even carry out an interview KYC through live video call. All the end-user has to do submit a picture of their ID card along with their selfie and the software will ensure the authenticity of their identity.
Sum it up
Online know your customer is a swift and secure method that can be performed within minutes without any hassle. The system ensures the reliability of the organization as it is extremely accurate and ensures data security as well. The resources and time spent on the verification process by the charity organization is also reduced by this robust and state-of-the-art know your customer solution.