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ID Verification for Trading Platforms – the Key to Secure Investments

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The online trading market is undergoing a massive boom both in terms of revenue generation and customer retention. Since cryptocurrencies and NFTs hit the shore and became a major attraction for global investors, online trading platforms also mastered growth of over $10.21 billion in 2022. Simultaneously, criminals are also becoming active in it and bringing various consequences. They use online platforms to launder money, commit fund organized crimes, and various other malicious activities.

Online trading platforms require roust identity verification services to draw a line between fraudsters and legit investors. Regulatory watchdogs including European Union (EU), Financial Action Task Force (FATF), and others mandate this industry to authentically identify customers. This blog covers the challenges online trading platforms face and ways how ID verification solutions counter them. 

Digital Onboarding – Challenges in Online Trading Platforms 

The online trading industry provides ways for global customers to access various financial systems and capital markets. However, along with advantages like easy investments, instant digital onboarding, and seamless transactions, these platforms are providing ample space for criminals. They then abuse the systems to either hide the proceeds of crimes or for personal financial gain. 


Where criminal activities such as money laundering and account fraud are forcing online trading platforms to build efficient ID verification mechanisms, industry-specific challenges such as market manipulation as well as insider trading are other add-ons. Therefore, digital trading websites require better solutions to assess risks and address them in time to provide a secure trading environment. 


Regulatory bodies are obliging  online trading platforms to implement KYC/AML regulations. In making identity authentication, transparency, security, and harmony a part of its operations, this industry faces the following challenges; 

Market-Based Manipulation

Due to the high risk of money laundering and other financial crimes, the stocks and their prices face a major backlash in marketplaces. Criminals use various techniques to exploit trading platforms and these activities massively influence the stock market. Some shares might skyrocket in revenue while others may fall driving financial loss to legit customers. Therefore, online trading platforms require robust identity verification solutions to combat the following fraud attempts; 

  • Wash Trading 

This process involves fraudsters buying stocks from one broker and simultaneously selling them to another. Criminals opting for wash trading on online platforms use synthetic identity fraud to escape suspiciousness detection. This type of market manipulation creates misleading scenarios within the marketplace. Ultimately, online trading platforms not only face a downfall with respect to shares but also face reputational loss.  

  • Pump and Dump Fraud

This involves fraudsters bypassing the identity authentication process and creating a falsely positive image to attract customers. This way fraudsters compel high-profile investors to make huge investments. Later on, criminals dump the shares at inflated prices and flee illegitimate financial benefits. This requires online trading platforms to establish strict identity verification checks in place and restrict criminal access. 

  • Spoofing Attacks or Layering 

Criminals often create false impressions regarding the demand for certain shares in the marketplace. For this, they use several fake orders and trap legit investors. Further use of identity theft helps them steer clear of the identification process. 


In order to overcome fraud attacks and secure their operation for ensuring a safe atmosphere, online trading platforms require identity verification services. AI-powered solutions help this industry to employ pre-trade controls while implementing a framework to detect suspicious activities in time. 

Insider Trading

This challenge involves the disclosure of non-public information which is often illegal to achieve an unfair advantage in the marketplace. This process helps fraudsters steer clear of identity theft protection measures while costing businesses millions of dollars in fines. 


Online trading platforms require ID verification solutions to verify customers prior to their onboarding. Moreover, they also need to perform background checks on potential clients that possess threats of criminal activities. Similarly, to escape hefty fines, this industry needs to train its employees so that they do not disclose any confidential information. Online identity authentication helps online trading platform to detect suspicious entities in time. 

Account-Related Scams 

Account fraud is another prevalent type of challenge online trading platforms are facing. Fraudsters either use synthetic identity fraud or steal profiles of legit customers to launder money, illegitimately earn bonuses, or reap benefits. In case online trading platforms lack inadequate regulatory and ID verification checks, they are sure to attract more fraudsters.

AI-powered digital onboarding solutions help online trading platforms to place precautionary measures in place for safer operations. Digital identity verification services provide tools such as liveness detection, real-time selfie identification, and authenticity checks to ensure the customers are present at the time of onboarding. 

In a Nutshell

Online trading platforms are facing numerous customer-related risks since global investors started making their way to them. While assuring ease of making investments, seamless transactions, and high chances of revenue generation, this industry is attracting a huge number of criminals. This requires online trading platforms to employ identity verification services to become a safe haven for legit customers.

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