Know Your Customer (KYC) protocols have been around for decades, providing a way for financial institutions and online businesses to verify customers’ identities. The requirements emerged to deter money laundering, terrorist financing, identity theft, and other fraud. But there are cracks in the armor.

KYC processes are under pressure as scammers deploy AI to game the system and gain access to alt financial markets like cryptocurrency, remittance, and precious metal trading — all of which have one thing in common: their product is money. 

The global scale and real-time nature of money movement platforms make them both attractive and vulnerable to sophisticated fraud schemes. Fraudsters salivate at the idea of direct access to funds without a physical product to liquidate.

What’s more, today they aren’t lone wolves — increasingly, they’re part of a growing “fraud-as-a-service” economy, where AI-powered tools and black-market services are easily available to bypass even the most stringent KYC protocols.

Screenshots from services offered on the dark web.

Deepfakes, voice cloning, phishing kits, and phony documentation are fueling a surge in account takeovers, APP fraud, and cash-out schemes. In fact, according to Deloitte, crypto scams alone accounted for an estimated $4.6 billion in losses in 2024.

With the gold standard of KYC becoming less effective against the screening of fraud, what can platforms do to stop money from ending up in the wrong hands? If you can’t trust eyes and ears, what can you trust?

The answer lies in identity data. With visibility into global transaction patterns across platforms, alternative finance companies can see behind the fakery and detect fraudulent activity. From digital language clues and proxy server usage to nuanced signs of attempted obfuscation, identity-based solutions can provide visibility into signals that aren’t so easy to fake.

“The biggest gain Uphold has seen since partnering with Riskified has been the acceptance rate approvals. We have been able to push the envelope with how we want to take more of a risk-based approach for our decisions and make sure we are maximizing our acceptance rates for our customers while protecting the company.”

Rob McCall
VP of Fraud Prevention, Uphold

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