Know Your Investor Solution: Fighting Identity Theft in the Investment Industry 


Cybercriminals use sophisticated technology to steal investors’ sensitive data in the digital world. Perpetrators can use sophisticated techniques to hack accounts, benefit from free services and hide illegal money. In the modern corporate world, knowing the identities of new customers and investors is critical before establishing any relationships. The application of Know Your Investor (KYI) solutions can help professionals authenticate the ID credentials, source of income and examine the risk associated with concerned entities.  

The following blog discusses in depth the significance of investor verification service and how cutting-edge technology can fight fraud in the investment industry. 

Know Your Investor Solution: A Quick Overview

Investor validation services are about authenticating the credentials of potential investing parties during the onboarding process. The KYI solution is essential to mitigate risk associated with concerned parties’ profiles and prevent fraud. 

Investment scams keep increasing by 50% with time worldwide. Keeping in mind the increasing crime prevalence, the importance of Know Your Investor (KYI) system is becoming evident. 

Complete Procedure Behind Know Your Investor Solution 

  • The investor must upload the government-issued ID and other corporate documents when required.
  • Expert Money Laundering Reporting Officers (MLROs) will validate records during the meeting.
  • The AI-driven solution also cross-checks data against global watchlists to discourage high-risk entities from entering the system.
  • The client receives final verification results that also get stored in the company’s back office.

3 Types of Investing Parties: An In-Depth Insight

As per the Securities Exchange & Commission (SEC), an investor can invest with securities without getting a licence or registering with the SEC. The following headings discuss in detail three types of investing entities:

  1. Accredited Investors

Accredited investing entities can invest in hedge funds, crowdfunding and equities that are unavailable for non-accredited parties. For this reason, these investors are important for various companies because it becomes possible to invest in unregistered schemes. To rephrase, the main objective of accredited investors is to help financial firms by investing in securities. Nonetheless, avoiding the SEC standards for company registration presents valuable opportunities to make massive profits while saving filing expenditures. 

  1. Qualified Investors 

Qualified investing parties are restricted by their respective jurisdiction and rely on investment deals. Such entities are legit and have the power to invest in private securities, capital funds & hedge funds. Nevertheless, such inventors can have more income & net worth which can be higher or equal to the regulatory threshold value. Various kinds of qualified investors are investment businesses, credit card companies, and financial institutions. 

  1. Sophisticated Investing Parties

Sophisticated investors are a type of high-net-worth entity and have vast experience & valuable industry insights. This gives such parties to leverage various opportunities. In other words, sophisticated investors have acumen and credibility in the market. In the context of high net worth and multiple sources of income, such investing parties can enjoy benefits such as pre-IPO securities. Additionally, sophisticated investors have the option not to liquefy assets  

Securities Industry & Financial Markets Association (SIFMA) 

The SIFMA trade group has introduced guidelines for licensed investment advisers & broker-dealers. This suggests incorporating the latest identity verification solutions (i.e., Know Your Investor services) when two entities exchange confirmation letters to participate in securities. 

According to Rule 506 c, investing firms must comply with the standard. Actually, the guideline is an amendment in Regulation D in the context of the Jobs Act. This allows investing parties to advertise investment schemes. Finally, the identities of all buyers must be verified. The following three points go into more detail regarding the rule:

  1. The investor must maintain an account with an investment adviser or a broker-dealer for up to 180 days or six months.
  2. As per Rule 506 c, the client must declare to the company that funds are not borrowed for the investment plan.
  3. Investing party must report the concerned firm in case of investment for a personal or joint account. In the case of accredited investors, the entity is responsible for informing the company.

Teaming up with a verified third-party vendor can help businesses implement Know Your Investor (KYI) service to validate the identities of company shareholders, directors, and private equities. Moreover, firms can easily authenticate the following records:

  • Shareholder’s Registers
  • Articles of Association
  • Bank Details
  • Proof of Address
  • Director’s Registers

Final Thoughts

The application of investor verification service can help the investment industry fight fraud effectively. This way, companies can connect with legit investing parties and maintain credibility in the market. 
KYI services are GDPR & PCI DSS-compliant solutions that can fight identity theft and money laundering cases. It allows investment companies to strengthen client relationships and guarantee a competitive advantage in a challenging market environment.


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