East-West Commerce Gets Biometrics Boost and Automated Compliance

The promise of cross-border commerce is always the opportunity to tap into new markets.

But no two countries, or even markets within a given country, are quite the same, especially when it comes to B2B payments. And therein lies the peril of cross-border commerce, Payoneer Chief Compliance Officer Micheal Sheehy told PYMNTS in an interview. He warned of the serious repercussions that exist for companies that run afoul of local rules and regulations.

“There are different flavors of regulation,” he told PYMNTS.

In a market such as the United States, know your customer (KYC) and other regulations have not evolved much over time; in the Asia-Pacific (APAC) region, regulations can evolve quickly. He pointed to Singapore as an example, where biometric KYC has been required for non-face-to-face transactions.

For the companies that would branch out into new territories and for the platforms such as Payoneer that help them do so, he said, “it’s all about building the flexibility within your compliance and risk programs to adjust the various parameters to mitigate the risks associated with those programs.”

In doing so, it becomes easier for larger sellers based in China and Hong Kong to sell into online marketplaces around the world. The platform approach can put support in place, in the local language, that can gather necessary documents in Chinese and validate local bank accounts to make sure that regulatory reporting is in place, he said.

Getting up and Running

“We have to tailor our program to meet the very prescriptive needs of the China sellers but also make it as frictionless as possible while collecting the necessary information, so that these people can get up and running,” Sheehy told PYMNTS.

As always, security remains top of mind, especially for small- to medium-sized businesses (SMBs), which are relatively resource constrained. Artificial intelligence (AI) and biometrics offer “great tools” for risk mitigation, especially in the battle against impersonation fraud, he said.

With all the information that is out there on the dark web, Sheehy said it has become easy for criminals to manufacture ID documents in order to file fraudulent unemployment claims or scam the government out of various stimulus programs. Liveness checks and other biometrics, he said, can pinpoint and stop the individuals (even bots) that are behind the creation of those accounts.

“Biometrics is in the middle, and AI is all around it,” he said of the high-tech solutions, “and AI has a spirit of continuous learning that keeps on going.”

As with all AI-driven models, building trust in the model and developing the requisite Big Data feeds takes time.

Looking out a few years, the company has plans to add data such as IP information, device IDs and other lines of defense that mitigate fraud risk, and perhaps in the longer term, maybe even an industry-wide repository of KYC standards that can help stakeholders collect information relatively easily.

The transaction will load, be created, and then go through a risk engine, at which point machine learning and AI will kick in and look at all the attributes for both senders and receivers, Sheehy said. Those attributes include the customer, the customer relationship, what device they’re logging in from, where they are, as well as where the device is located versus the address they gave at registration.

“We’ll ensure it all meets the necessary parameters to give the transaction the ‘go ahead,’” he told PYMNTS.