The Intertwined World of Identity Verification, Compliance, and Fraud 

 October 29, 2021

As most know Your Business can relate, identity verification, fraud detection, and regulatory compliance are terms that go hand-in-hand. To accomplish the three, firms are dependent o a wide array of automated solutions to make the customer experience secure, swift, and convenient. This blog will be taking a deeper dive into how major companies ensure customer security, convenience, and stay compliant with global regulations with the help of automated solutions.

Minimizing Friction

Regardless of which industry you may belong to, minimizing friction during the initial stages of account registration or customer onboarding must be a top priority. This is crucial, as it increases customer acquisition and retention rate – both of which are necessary for a company’s financial wellbeing. Here are some simple tasks that can be easily automated for imparting better user experiences:

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Address Verification

A simple task such as address verification must not be deemed tedious by customers in today’s digital era. Instead of asking them to fill out lengthy forms, automated address verification solutions must be employed. With the help of these systems, it can be easily validated whether the person resides at the provided address or not. All that is required from customers is to submit an official document during the ID authentication process. Through an automated process, address details are extracted and verified.

Identity Proofing

Verification of identity is a mandatory procedure that is implemented prior to availing the services of any business. This process is particularly necessary for identity theft protection. The process, however, must not require customers to stand in long queues to have themselves verified. Instead, digital ID authentication software can be utilized.

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A digital ID verification software has the ability to extract data from an official identity document through an automated process. This is done with the help of Optical Character Recognition technology. Once the data has been extracted, it is verified against various global watch lists and government databases. Within a matter of seconds, the entire process is completed, ascertaining the customer and the company that the data is now safely verified and stored. Often, biometric verification is used for real-time identity verification.

Fraud Detection

While the KYC (Know Your Customer) process requires the use of identity verification solutions, there’s another software that is utilized during the same process.

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AML Procedures

AML (Anti-money Laundering) screening software has become the key asset of financial institutions today, particularly because of its ability to conduct background screening of every customer that becomes part of the system. This step is essential, as it allows firms to keep a check on high-risk users. Additionally, it also serves as a disincentive for money launderers.

Here are some screening lists that customers are scanned against during the screening process:

  • Criminal watch lists
  • Global sanctions
  • Politically Exposed Person (PEP) lists
  • Adverse media news

Transaction Monitoring 

Another important task for fraud detection is the ongoing monitoring of customers’ transactions. A fully automated transaction monitoring solution allows financial institutions to closely monitor the transactions of the customer. This can be done in real-time and on a daily basis.

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By combining the information collected during the identity verification process with the data gathered through AML screening, a whole-picture analysis of the customer is made. As a result, fraud risk can be substantially minimized and suspicious activity can be timely detected. Examples of transactions that are monitored include regular cash deposits, wire transfers, cash withdrawals, and more.

Compliance with Global Regulations

Global regulatory authorities have mandated compliance with AML and KYC procedures. According to the FATF (Financial Action Task Force), every financial institution is strictly advised to set internal standards for combating frauds such as identity theft, money laundering, and the financing of terrorist activities. Non-compliance with these regulations can result in hefty fines and penalties, imprisonment to as much as five years, loss of reputation, and even the closure of the facility.

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Thus, to stay compliant with these regulations, identity verification systems and AML screening software are increasingly gaining prominence worldwide. Thanks to these technologies, firms are able to keep fraudsters at bay, onboard legitimate identities, on top of effortlessly maintaining regulatory compliance.

Key Takeaways

  • Minimizing friction, mitigating fraud, and staying compliant are crucial tasks for the financial stability of a verifying businesses
  • Numerous automated and AI-powered solutions have been developed to accomplish these tasks in a single go

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