Know Your Investor (KYI) – Elevating Fraud-Free Crowdfunding Opportunities 


Crowdfunding has been around since 1997 when a British rock band created pools for online worldwide donations. Since then, this industry has undergone several revolutions and ultimately reached online sites to bridge global lenders and borrowers. In this process of financial assistance, fundraising platforms are facing a noticeable increase in money laundering, identity theft, and other fraud attempts. In return, crowd-financing platforms experience strict regulatory scrutiny. 

Businesses can open doors to more investments, instant growth, high revenue generation, and financial back-ups by pitching crowdfunding platforms. In wake of this, online financing sites need to integrate Know Your Investor (KYI) solutions to ensure secure overdoing and partnerships. This blog sheds light on the risks crowdfunding platforms face and how online IDV solutions help counter them. 

Investor Authentication and Types of Lenders – An Overview

Crowdfunding is a fast-growing financing method that helps businesses raise funds for their operations. In this process, individuals from around the globe come together and invest their money. However, crowdfunding sites experience a two-sided challenge as they facilitate both lenders and businesses. This makes investor verification services a must-have for online platforms. 

Crowdfunding sites need to outline the types of individuals they wish to grant access to their platforms during investor onboarding. It can depend on the professional level, income, regulations put forth by authorities, sums of money, and other region-based limitations. However, with investor verification solutions, crowdfunding sites can verify and onboard the right lenders. Furthermore, types of potential entities these platforms can pitch to involve the following:

Accredited Investors

High-net-worth lenders, established companies, trusts, banks, and insurance firms are the major attractions for businesses. These entities count as accredited investors because they provide enough money to uplift a start-up’s financial status. Furthermore, these lenders also fall under the know your investor regulatory bodies’ protection, which further elevates their status in the marketplace. 

Despite their advantages, accredited lenders also pose several risks. This requires crowdfunding platforms to bring in efficient investor authentication for addressing the threats involved in investments. 

As per legal requirements, accredited lenders need to meet some requirements which largely involve their net financial value. Individuals holding more than $200,000 self or joint worth with a spouse of over $300,000 for the last two years fall under this category. Therefore, crowdfunding platforms require investor verification services to onboard required entities and reduce the chances of falling victim to fraudsters. 

Retail Lenders

Non-professional lenders that can not put more than 10% of their total annual income as per legal limitations are known as retail investors. However, these fundraisers serve as a safe haven for third-party money launderers. They flow their illicit funds through retail systems, finance companies, and escape investor verification services.

Investing a lesser amount of funds serves as a sure way for fraudsters to escape regulatory checks. Therefore, crowdfunding sites need to incorporate efficient online investor verification solutions to identify lenders and cross-verify them across global databases. This way, financing platforms can mitigate the risks of experiencing criminal threats.

Investor Verification Solutions – Countering Crowdfunding Problems 

Crowdfunding platforms provide start-ups, small businesses, and others with opportunities to accelerate their financial growth. While providing a pool of potential investors, these online sites provide benefits to both lenders and companies. However, crowdfunding platforms are facing an increase in fraudulent activities as criminals use them to invest their ill-gotten funds and escape suspiciousness detection. 

Online collective funding platforms should integrate automated investor verification solutions to carry out robust identification. The AI-powered IDV services streamline secure onboarding by providing real-time customer validation. Furthermore, crowdfunding sites can verify investors across global records, which adds an extra layer of security to fundraising process. IDV solutions further address the following crowdfunding-related problems. 

Investment Scams

Fraudsters use crowdfunding platforms to spread their ill-gotten money. Inadequate know your investor services increases their chances of steering clear of the identification checks. Therefore, crowdfunding platforms require robust IDV solutions to ensure they are not becoming a part of some investment scams. Otherwise, they can face hefty penalties and reputational damage while exposing businesses to criminal threats.

Identity Fraud

Fraudsters targeting crowdfunding sites to carry out their malicious activities and commit money laundering, deploy various techniques to escape know your investor checks. They provide incomplete information that creates a camouflage for them to bypass identification checks.

AI-powered investor verification online services provide document validation along with cross-checking of information that helps crowdfunding platforms to better identify fraudsters.

In the End

Online crowdfunding sites provide businesses with a variety of investors to increase their financial growth. However, onboarding risk-possessed lenders can have negative consequences. They can expose crowdfunding sites to hefty penalties, investment scams, and data breaches. Therefore, efficient know your investor services are a must-have for online platforms to combat fraud attempts.