Home Payment processors How can identity verification prevent scams in the MLM and D2C industries?

How can identity verification prevent scams in the MLM and D2C industries?


In India, there have been several multi-level marketing (MLM) frauds. Investing in stocks and commodities, pay per click, investing in the IT sector or investing in infrastructure have all resulted in scams. Aaryarup/ATCR, Unipay, Stock guru, TVI Express and others are scamming over Rs 10,000 crores.

Multi-level marketing is a sales strategy of some companies to sell directly to customers. The existing seller encourages the new seller to sell the company’s products to others and to try to bring in others as recruits. This process lasts forever. Multiple layers of sales force for direct selling (D2C) make up the MLM wireframe.

Most of these services are not registered in India and divert money through unauthorized payment services. E-commerce fraud usually starts with a fake identity with a stolen credit card or purchasing stolen data on the dark web. Initially, fraudsters test the stolen card by making small purchases, which turn into large purchases.

Sometimes even friendly frauds happen when a customer makes a purchase through an online transaction and then requests a chargeback from the payment processor claiming that the transaction was invalid. It allows them to receive invoiced items free of charge.

Saradha Group Scam: A Revelation

The Saradha Group scam was a fund company that took advances from people in the name of land and houses. They lured investors with promises of repayment. The total amount scammed by the investors stood at Rs 2,700 crores.

Nearly 80% of investors have lost their money. The group operated four different companies to accept money through fixed deposits, recurring deposits and monthly deposit programs. They also provided real estate and foreign visits to investors. The three main perpetrators of the scam have been arrested and are in prison. But investors’ money remained lost.

More light in the D2C industry

The D2C industry refers to direct sales to customers. This industry includes in its scope, multi-level marketing, e-commerce and direct retailing of goods directly to customers through a sales force network.

E-commerce is creating an online shopping location where direct customers can buy directly from you. Customers pay transparent funds transfer for their purchases through payment processors or payment gateways. Businesses sell both goods and services through this process. E-commerce websites like Amazon and Flipkart facilitate these transactions by sourcing products from a dense network of individual stores.

Direct retailing involves an agreement between the manufacturer and the retailer. The manufacturer acts as the licensor and the retailer becomes a franchisee and the seller of the product. The product involved in the sale becomes licensed merchandise.

How Digital Onboarding Can Help Strict Compliance and Threats in the MLM and D2C Industries

MLM sales sometimes represent real businesses doing direct sales, but most of the time, people who join MLM programs lose their money. In India, Speak Asia, Stock guru and Sarada India are big scams that cheated people out of crores of rupees. In e-commerce industries, a rigorous onboarding process sometimes sits in an abandoned cart.

The rapid increase in mobile and e-commerce transactions requires customers to provide sufficiently verifiable information during the onboarding process. Online fraud detection tools like identity verification software and other risk-based tools help minimize fraud. Feature-rich identity verification software helps ensure compliance with government regulations and know your customer.

Customers shop on the go these days and therefore regulations need to protect customers where they are. Identity verification software helps streamline the process in organizations where customer focus is key.

Why Identity Verification is Vital in the MLM and D2C Industries

In the MLM and D2C industries, some manufacturers trust a sales force network and entrust their product to them before the sale. Unscrupulous salespeople who stall with products or money are nothing new. Regulation and proper KYC of sellers via identity verification software is essential in such cases.

This will prevent the occurrence of fraud. Using proper identity verification software to complete this process is a big help in preventing fraud and scams in these industries. India has introduced the Consumer Selling Direct Rules 2021 which is of great insurance for the direct selling industry which is worth Rs 22,000 crores with nearly 74 lakh distributors.

Robust KYC verification software, especially with increasing digitization, can minimize manufacturer headaches. It also helps to complete the KYC and AML process and prevents scams and fraud.

What technologies are leveraged in MLM and D2C customer identity verification

Using digital tools such as the following helps detect fraud and scams in the MLM and D2C industry:

Biometric verification: Checking vendors for unique physical characteristics, such as moles or facial spots, mustaches, etc., is a great way to keep digital track.

Digital fingerprint analysis: This relies on IP scanning, email and phone scanning, device fingerprinting, reverse lookup of social and digital platforms, and the use of machine learning for risk scoring. .

Video verification: Machine learning helps weed out fake and synthetic IDs. Fraud detection solutions help spot connections between two similar accounts.

  • Biometric verification helps spot fake IDs when there is a mismatch between the features revealed on the biometric scan and the facial features shown on the ID.
  • PEP scans help perform AML checks to reveal sanctioned list individuals who are on global restricted and sanctioned lists.

How IDcentral’s Identity Verification and eKYC Verification Can Help the MLM and D2C Industries Fight Financial Fraud

IDcentral facilitates various online digital tools such as face scans, biometric verification, PEP scans and selfie verification help prevent and control fraud to a great extent.

Matching photo ID: Using techniques such as biometric verification and identity verification, IDcentral facilitates photo ID matching to ensure official documentation fraud detection at the time of onboarding.

Face Match: The facial scanning feature matches the seller’s face in the sales network at the time of onboarding to avoid duplicate or restricted entry.

PEP screening: PEP Screening is done by keeping the organization up to date with the most recent 1000+ global watchlists including PEPs, Fraud and Sanctions and keeping your institution up to date to prevent fraud and money laundering. ‘silver.

Verification of documents: Using government database verification for national identity verification, IDcentral quickly verifies documents from a direct seller’s network.

Last takeaway

By applying various identity verification techniques like the ones described above, you can completely avoid frauds and scams. The MTM and D2C industry can avoid the mislabelling of illegal pyramid selling and fraudulent industry labels. Identity verification is crucial for online sellers and customers when onboarding.

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*** This is a syndicated blog from IDcentral’s Security Bloggers Network written by Philip Chethalan. Read the original post at: https://www.idcentral.io/blog/identity-verification-to-prevent-scams-in-mlm-and-d2c/