All banks today depend on ID verification to stay compliant and prevent fraud. Governmental bodies now have stricter KYC and AML laws than ever before, resulting in many banks adding more paperwork requirements to their bank processes. As a result, customer experience can take a hit, and agents become overloaded.
However, the latest ID verification technologies allow financial institutions, including banks, auto lenders, and insurance companies to streamline their KYC process while maintaining the highest levels of accuracy. In this blog, we’ll discuss how the latest forms of ID verification can prevent fraud.
Why fraud prevention is so important
Any company that deals with high-value deals or transactions want to maintain the maximum amount of business. Turning down potential customers is bad for business, but there are also consequences for inadvertently letting in bad actors that can use the organization for illicit activities or funds. Failure to do so will show up in governmental audits, where there are steep consequences for businesses that skimped on due diligence.
Audits that reveal an institution’s association with bad actors involved with money laundering, fraud, or terrorist financing do not take excuses. While the institutions may not be complicit in the fraudulent activity, they will be penalized regardless because the onus is on them to take sufficient KYC and AML measures. Therefore, large fines are imposed on such organizations, and a bad reputation can be acquired.
Dealing with the fallout of financial fraud is never fun, which is why it’s better to prevent it in the first place. With today’s understanding and technological innovations, there is no reason why all organizations can’t maintain the highest compliance posture and keep bad actors out before they even have a chance to wreak havoc.
How ID verification supports fraud prevention
Preventing fraud is a multi-pronged task, but ID verification is an essential and ubiquitous aspect of it. ID verification is much akin to a bouncer at a club. If a troublemaker makes his way into a club and starts picking fights or causing damage, security or even the police can always remove him. But the damage is done: people may have been hurt, the place acquires a reputation for trouble, and there may even be financial repercussions due to damage incurred. That’s why most bars and clubs employ bouncers: it’s easier to keep the bad guys out than to undo the harm they cause.
Organizations such as The Financial Action Task Force (FATF) ensure that organizations in member countries perform customer due diligence.
Document and ID verification is therefore a necessity. This requires customers to present government-issued photo ID such as passports, state IDs, and driver’s licenses which are cross-referenced with public and private records. Other personal details are also verified including full name, date of birth, and address. Thanks to facial recognition technology, electronic ID verification allows photo ID images to be instantly compared to databases.
During this process, any additional information about the prospective customer will usually be surfaced from government offices, watch lists, and credit bureaus. This can ensure that a new customer doesn’t represent a high fraud risk due to personal or professional relationships, industry of business, or previous history. If a high fraud risk is detected, the institution may still decide to onboard the customer, but they are obligated to keep a close watch on his or her account and report any suspicious activity.
The next generation of ID verification is mobile-optimized
However, in the case of identity theft, the form of ID doesn’t actually represent the person who is applying for the account. Therefore, any background checks related to that ID overlook the fact that the person in possession of an ID and the person on the ID card may not be one and the same. As a result, bad actors can still get into the system and wreak havoc.
The latest forms of ID verification use facial recognition technology to match a person’s photo ID with a live selfie. Here’s how it works:
- An agent sends a text message link that opens up to a secure and intuitive mobile environment.
- The customer uploads a selfie taken in “live” mode along with a picture of their photo ID.
- The photo in the ID is automatically compared to the selfie.
- A match is confirmed, with no need for a human judgment call or in-person meeting
The benefits of mobile-optimized ID verification
Mobile-optimized ID verification offers benefits for organizations, regulators, and end-customers. Here are some of the major advantages:
- Bypasses the in-person visit: Customers can get their ID verified from any location. There is no need for them to go to a physical branch, or even be in front of their computer. Since customers nearly always have their smartphone on hand, they can be verified and serviced without extra effort.
- Intuitive: Customers appreciate the ease of simply taking a selfie and picture and uploading them via phone: no special application, scanners, or printers required.
- Extra secure: One-time password (OTP) and knowledge-based authentication (KBA) is employed to ensure even the toughest security and compliance requirements are met.
- High accuracy: AI-powered facial recognition technology is practically foolproof, with accuracy rates approaching 100%.
The bottom line
By employing advanced ID verification technology, companies can prevent fraudulent bad actors from infiltrating their systems and causing financial and reputational harm. Thankfully, the latest ID verification solutions make the KYC process easier, not harder. Companies can keep up with stringent KYC demands without adding more paperwork requirements to application processes. Learn more about mobile-optimized ID verification at Lightico.com.