AU10TIX Finds: Mt. Gox Bitcoin Exchange Crash Hastened by Inadequate ID Authentication Practices
Mt. Gox has been losing foothold already before the grand theft. A significant contributing factor to the downfall were tightening KYC/AML/ATF regulations that mandate customer identity authentication and screening based on government issued picture IDs.
Mt. Gox, the world’s leading Bitcoin exchange has crashed sending shockwaves across the market and plunging the virtual currency, according to CNBC, to a below $200 low (February 20, 2014, http://www.cnbc.com/id/101431022).
The coup de grace for the trading platform which even at its last days controlled 42% of the global Bitcoin market, has been the reported stealing by hackers of 744,400 Bitcons valued at $350 million according to Coindesk (February 25, 2014, http://www.coindesk.com/mt-gox-loses-340-million-bitcoin-rumoured-insolvent/).
But according to AU10TIX analysis, Mt. Gox has been losing foothold already before the grand theft. A significant contributing factor to the downfall were tightening KYC regulations that mandate customer identity authentication and screening based on government issued picture ID documents.
At the world of online, this means having to verify and check significant volumes of ID document images that may come from any country, at any conceivable quality. When done without adequate technology, this process quickly becomes a customer acquisition and service bottleneck, costing loss of business and disgruntlement that can resonate in social media channels.
As an Ex-VP in an investment bank commented on Quora:
“Mtgox requires you to send them a copy of your passport picture and proof of residency. This process takes at least a week(!), and then if you want to withdraw money, this process can take several weeks. So because people find coinbase a lot more convenient people are willing to "pay" for the extra convenience.”
Another user commented on Bitcointalk:
“Well, it does prevent or slow people from taking their coins out… Scary stuff. I'd avoid Mt. Gox. Campbx.com and many others are good alternatives, right?”
“It is hardly surprising” says Ron Atzmon, Managing Director of AU10TIX:
“Online (and mobile) financial services of virtually all sorts are growing at an amazing rate. Those who haven’t already acted towards the introduction of latest ID authentication and record generation technology are bound to hit the wall. That is if they plan to grow and become a significant player. The volumes, the range of documents, the huge variability in image quality – all these cannot be effectively handled but people who sit somewhere and staring at endless stream of images for hours. It is not about security and even KYC compliance alone. It is clearly about the economy of the business and the ability to win clients and avoid churn."
“There’s one more point that must not be ignored”, says Ofer Friedman, VP Marketing of AU10TIX:
“Even in markets that offer customer identity data referencing resources, up to 20% of customers have low- or no- digital footprint to check against! This is a huge customer pool that is out of the game. That is unless you have technology such as the AU10TIX BOS platform that can carry out the most comprehensive security checks possible on these people’s ID images. That is why our clients look at this technology as a multi-purpose solution: A best of breed security and KYC measure on one hand but also a customer acquisition and operating efficiency measure on the other."
AU10TIX Limited, a fully owned subsidiary of ICTS International N.V, deals with the authentication and digitization of identifying documents including Passports, identity cards, driving licenses and other complementary identifying documents. The company specializes in implementing hardware & software based applications used for scanning, identifying, content retrieval, authentication and validation of identifying documents. AU10TIX is a pioneer of all-channel (front-end and online) ID authentication and processing solutions. The company's products drastically reduce identifying document-based fraud, reducing the costs associated with client processing and enabling effective regulatory compliance, while making the sales and support operations speedier and considerably more efficient.
For more information about AU10TIX, visit http://www.au10tix.com/
About ICTS International N.V.
ICTS specializes in the development and implementation of innovative security concepts and solutions designed to meet the needs of a variety of industries, mainly aviation transportation, border control and sensitive facilities. ICTS International benefits from over two decades of expertise and international operational experience in transportation security, with a particular emphasis on high-risk environments, passenger processing transactions and the integration of security services to provide a comprehensive security solution.
It also offers a wide variety of customized training programs, tailored procedures and a wide range of security consulting services. The company has developed and implemented unique technological solutions, based on its comprehensive approach to security, designed to enhance the level of security while accelerating the security check process.
For more information about ICTS International N.V. visit http://www.icts-int.com/
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