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The scandal is one for the ages. Wells Fargo recently made headlines for all the wrong reasons after its employees opened more than 2 million fake accounts to meet sales goals and reap lucrative bonuses.

Some 5,300 employees were fired between 2011 and 2016 for the scheme, Fraud Scandalaccording to the Washington Post, but it’s too little too late to recoup a marred reputation. (And of course the $185 million fine.)

The sheer size and duration of the deception is enough to send shockwaves across the financial industry. After all, if more than 5,000 employees in one of the most established financial institutions in the country were willing to engage in fraudulent practices—who’s to say it can’t happen in your firm, too? It doesn’t help that the banking and financial services industry yields the most fraud, by far, according to a report from the Association of Certified Fraud Examiners.

Financial advisors and firm leaders must now turn their eyes toward prevention of the next fraud headline—and quickly. This is where digital signature technology can play an important role. 

Digital signatures can prevent fraud 

Digital signatures, an enhanced and secure type of electronic signature that permanently embeds the legal evidence of a signature into a signed document, help organizations prevent both internal and external fraud. Because of this technology’s various levels of protection, it’s possible that the use of digital signatures could have prevented the Wells Fargo scandal entirely.

Specifically, digital signatures reduce a company’s risk of fraud with:

  • Identity authentication. Before e-signing can even occur, identities must be confirmed. That is, signers are verified via an identity authentication Although this could be via email, it could also be through a one-time PIN code sent via text message, knowledge-based authentication (signers are asked questions about information found on public databases), know-your-customer authentication (confirmation of personal data) or other methods. For heightened security, many financial services agencies require a combination of two or more types of authentication—called multi-factor authentication
  • Audit trail. Digital signatures never stand alone. They are accompanied with comprehensive digital audit trails that record every part of the signing process and provide users with detailed data and information that shows, step-by-step, exactly what happened before, during and after a digital signature occurred. Because of this level of information, audit trails provide key legal evidence should accusations of fraud ever arise. Audit trails record time stamps and information regarding the creation of a document, IP addresses, when documents were displayed to signing parties, if any changes were made to documents, when documents were acknowledged, when digital certificates were issued, when each signature was applied and much more.
  • Consent requirements. With digital signatures, customers must formally agree to the terms of a contract or an agreement, which is tracked as legal evidence. As noted above, detailed audit trails record exactly when the terms were reviewed, when the terms were approved, when documents were signed and by whom they were signed, including IP addresses and digital certificates from users.
  • Tamper evidence. Digital signatures deploy tamper-evident technology, which automatically detects if any changes are made to documents and alerts users of the potential interference. It does this by taking a “snapshot” (or hash) every time someone signs or initials the document. If something changes between snapshots, out goes the alert. Once an alert is received, firms can dig deeper to uncover potential fraudulent activities. Digital signatures can also enable tamper proofing if desired, which actually prevents anyone from making any changes at all to a document after it has been signed.
  • Simple verification. How many times have you checked to make sure your client’s wet ink signature is consistent with the penmanship on his or her driver’s license? Probably not too often. And even if you did, it could be hard to distinguish between a fake signature and an authentic one. Digital signatures, by contrast, contain embedded legal, cryptographic evidence, such as signing credentials and identity authentication and tamper-evident technology, to determine whether or not the signature is indeed a valid one. Since that information is embedded into a PDF, a verification symbol, such as a checkmark or an “x,” will automatically populate next to the signing field to easily tell you whether or not the signature is valid. 

Unfortunately, there is no absolute cure for poor ethics. The financial services industry—as is true for all industries—will constantly have to stay a step ahead of fraudsters. Taking advantage of technology advances, like digital signatures, is a great way to keep up the pace and avoid the next Wells Fargo disaster.

After all, actively avoiding risk isn’t just sage advice for companies—it’s essential for sustaining leadership at all levels, too. Fraud scandals are almost always accompanied by job loss—in one form or another. In this case, Wells Fargo’s CEO, John Stumpf, announced his immediate retirement in the wake of the scandal. But in another case, it could be your job that’s on the line.

 

To learn more about how digital signatures could work for your organization, schedule a free demoRequest a Live Demo