Know Your Investor (KYI) – Driving Efficacy for Crowdfunding Platforms

Crowdfunding has emerged as one of the best ways for opening doors to more investments, instant growth, high revenue generation, and financial back-ups. However, online platforms are facing higher risks of money laundering, identity theft, and other fraud attempts. Despite providing potencies such as easy pitching to investors and attracting more entities crowdfunding platforms undergo strict regulatory checks to make sure they don’t facilitate the flow of illicit funds. 


Individuals who ensure the financial uplift of businesses can also be posing threats like money laundering. Therefore, crowdfunding sites need to employ better know your investor services for ensuring they are not onboarding fraudsters. The blog provides detailed insights into risks online platforms face while raising funds and ways online investor verification help mitigate them. 

Investor Verification Service – Shedding Light on Types of Potential Entities

Crowdfunding is the fastly growing financing method that helps businesses to 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 investors and businesses. This makes investor verification services a must-have for online platforms. 


Moreover, as they involve flow of money, crowdfunding platforms are also subject to legal securities. This requires these service providers to establish efficient know your investor mechanisms for ensuring they are giving way to legit entities. 


Moving on, while building strategies, crowdfunding platforms need to outline the types of investors they want to onboard. 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 online, crowdfunding sites can verify individuals and onboard the right ones. Furthermore, types of potential entities these platforms can pitch to involve the following; 

Retail Investors

These are the non-professional entities that can not invest more than 10% of their total annual incomes as what legal limitations mandates. This may indicate that retail investors might not possess risks of money laundering or any other criminal threat but that is not the case. 


Investing less amount of funds serves as a sure way for fraudsters to escape regulatory checks. Therefore, crowdfunding sites need to incorporate efficient know your investor solutions for mitigating risks of experiencing criminal threats. 

Accredited Investors

Accredited investors refer to the high-net-worth entities, lending companies, trusts, banks, and insurance companies. These entities have enough money to uplift a start-up’s financial status. Furthermore, accredited investors also fall under the regulatory bodies’ protection which further makes their status higher in the marketplace. 


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


Moving on, accredited entities need to meet some requirements while becoming a part of crowdfunding. This includes their individual income to be over $200,000 or joint worth with a spouse should be more than $300,000 for the last two years. Therefore, crowdfunding platforms require investor verification services to onboard required entities and reduce the chances of falling victim to fraudsters. 

Online Investor Verification – Digital Solutions to Crowdfunding Platforms’ Problems 

Crowdfunding platforms provide start-ups, small businesses, and others with opportunities to accelerate their overall growth. While providing a pool of potential investors, these online platforms provide benefits to both the investor and the company. 


However, crowdfunding sites are facing an increase in fraudulent activities as criminals use them to invest their ill-gotten funds and escape suspect detection. Therefore, online crowdfunding platforms require robust identification prior to investor onboarding.


The AI-powered investor verification services are streamlining the onboarding process by providing crowdfunding platforms with real-time identification. Furthermore, they enable online platforms to access global records that add an additional layer of security to the fundraising process. Know your investor services further addresses the following crowdfunding-related problems. 

Investment Scams

These are one of the most prevalent risks that crowdfunding platforms undergo. Fraudsters use these platforms to flow their ill-gotten money. Inadequate investor verification services increase their chances of steering clear of the identification checks. 


Therefore, crowdfunding platforms require robust investor verification solutions to ensure they are not becoming a part of some investment scams. Otherwise, they can face hefty penalties and reputational damages while exposing businesses to criminal threats. Know your investor solutions provide active identity screening of individuals that serves as additional security for both legit entities as well as crowdfunding platforms. 

Insufficient Identity Information

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.


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

In Summation

More investors increase the chances of business financial growth. However, onboarding risk-possessed entities can drive 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.

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