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How Real ID Act enables Digital KYC Services for US Customers?

Richard Marley
June 07, 2018
4 minutes read
5527

Digital KYC Services for US based customers are in debt of Real ID Act as it streamlined the process of issuance of identity verification documents. Real ID Act was able to introduce basic standards to assist US States when they issue a driving license to their citizen or any other relevant identity verification document. 9/11 was a big influencer in the introduction of this act as the commission made for investigation of the catastrophe gave the suggestion to introduce a uniform system of issuing IDs to citizen. They suggested a federal legislation that will not be binding on the states to follow but will serve as fundamental groundwork to establish verifiable documents for the citizens of United States.

Why Real ID Act was needed?

Before the introduction of Real ID act in 2005, there were stark differences among driving licenses and other IDs issued by states to their citizens. Some of them used sophisticated method to discourage identity theft and fraudulent activities while others used outdated techniques to issue same documents. This created a haphazard ID regime which was not only inefficient but also created financial and criminal loopholes. Although, introduced before Digital KYC services became all the rage but Real ID Act also enabled businesses and companies to ascertain the identity and credentials of their customers.

What does Real ID Act entail?

The intention of Real ID Act was very simple: Stop the practice of making secure yet fraudulent IDs and driving licenses. In hindsight, this is the intention of Digital KYC Services as well. Real ID Act wants states to adopt technologies and practices that eventually lead to issuance of secure identity documents. According to the legislation, a standard ID must have following characteristics:

It must be machine-readable
Must include 2-D barcode

Within that bar code, following information must be stored

Expiration Date of document
Full Legal Name of document holder
Data of transaction
Data of Birth of document holder
Gender of document holder
Address of document holder
Unique driver’s license or Identification card number (whichever is applicable)
Card Design Revision Date
Inventory control number of physical document
Name of state or territory that has issued the document

Now as you can see, an identification document containing all this data will be sufficient to verify the identity of a person. In order to ensure the credibility of the document itself, the machine readable nature and 2-D barcode are satisfactory.

In order to further fortify the security of these identity documents, there are other measures suggested to be made part of these documents that will hinder tampering of documents, production of counterfeits or for duplication of genuine documents.

KYC Services Supported by Real ID Act

Although, there are many states who are yet to fully comply with Real ID Act, but the overall response to the process has streamlined the way for Digital KYC services. With machine readable driving licenses and 2-D barcode carrying vital information, each customer can be verified against the credential that they have entered while making an online purchase or for opening a bank account.

The rate of online fraud and the risk of online identity theft has also reduced substantially because of Real ID Act as not only the law enforcement agencies have been able to identify personnel through a unified system of identity verifying documents but Digital KYC services providers have been able to verify the real identity of a user because of technologically advanced documents. This act has enabled Digital KYC services to verify following:

Identity of an Individual
Age of an Individual
Address of an Individual

So, to put it in nutshell, Real ID Act has assisted companies like Shufti Pro to provide seamless identity verification services for US based businesses. It is one of the finest examples of real world legislations supporting the technological world in order to ensure transparency and ease of business. Because of Real ID Act, technologically advanced identity documents are now issued in US States that can be verified by Shufti Pro in 30-60 seconds with 100% accuracy.

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Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

Latest News

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1803 Arrested in Money Laundering Crackdown Coordinated by 27 Countries
Why Real ID Act was needed?
KYC Services Supported by Real ID Act
In a major money laundering crackdown, European police identified more than 18,000 money mules, arresting a total of 1803 individuals.

On December 1, the seventh European Money Mule Action (EMMA 7) concluded after two and a half months. 27 countries were involved in this initiative along with Europol, Eurojust, the European Banking Federation (EBF), the FinTech FinCrime Exchange, and major companies from the private sector including Microsoft, Western Union, and Fourth line.

The EMMA has been operational since 2016 and the purpose of this initiative was not only to identify money launderers but also the sources of their illicit gains.

According to Europol, the EMMA initiative is the biggest international operation of its kind, where 400 banks successfully reported 7000 fraudulent transactions. As a result, losses counting up to €70m ($79m) were prevented and 324 recruiters were identified.

Europol also claims that money mules are used for money laundering and a variety of online scams, including e-commerce fraud, phishing, SIM-swapping, and man-in-the-middle attacks. These claims are based on the leads that came in from police intelligence and private-sector reports.

Immigrants, students, and those in difficult financial situations are often targeted by giving the hope of easy money. They are approached through various methods including job adverts on social media.

Fraud experts and police issued warnings of an increase in the recruitment of money mules in the pre-pandemic time. A spike was seen in these scams when many lost their jobs during the COVID outbreak.

Recruitment of money mules and the subsequent crimes have called for the police to run regular awareness campaigns like Europol’s “Don’t be a mule” initiative.

Suggested read: Money Laundering Ring Pushed $4bn through 60 HSBC Accounts within 2 Years

Recent Posts

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Top 5 Cybersecurity Trends to Look Out for in 2022
Why Real ID Act was needed?
KYC Services Supported by Real ID Act
With 2022 just around the corner, new developments in cybersecurity are already beginning to take shape. Considering the 600% upshot in cybercrime amid the pandemic, the urgency for cybersecurity is further augmented. Given the dependency of modern businesses on digital solutions, it is safe to say that the corporate world may undergo monumental upgrades. New regulations for cybersecurity updates are inevitable to combat the increasing number of cyberattacks.

According to reports, cyberattacks contributed to losses of up to $6 trillion in 2021 alone, which is the single largest economic upset in history. By 2025, cybercrimes are expected to cost the world $10.5 trillion. As governments work towards elevating their cybersecurity posture, the key criteria here is the extent to which businesses can adopt the best practices.

1. Phishing Attacks to Remain a Major Issue

Although Canada is far ahead as compared to the rest of the world in mitigating cyber threats, 78% of Canadian organizations still faced a cyberattack in 2020. This indicates the catastrophic effect of cyberattacks with numbers rising in the negative direction. The most common type of cyberattacks took the form of ransomware and phishing. Looking at the trends of 2021, it’s clear that hackers and malware are becoming advanced with improvements in technology.

A rise in phishing attacks was observed this year, as fake COVID-19 vaccination drives led to e-commerce fraud where credit card information was collected by bogus online shops. The number of overall data breaches recorded by September 2021 was 1,291, which had already exceeded the total of 2020. In order to avoid becoming the victims of phishing sites and emails, businesses must elevate their identity verification measures and conduct employee training. For this reason, the demand for cybersecurity professionals will further increase in 2022, as companies will need their guidance to stay ahead of their competition.

2. Internal Threats & Cloud Attacks

Trojan horses are rightfully named as they can effectively wipe out a large amount of data. However, the origins of all cyberattacks are not malware, as statistics show that 15 to 25 percent of data breaches were due to the involvement of corrupt employees or business partners. In the coming times, virtual workplaces will further gain prominence and companies will need to be more careful at the same time. Therefore, it is becoming essential for businesses to control access levels for new employees, freelancers, and third-party suppliers.

As the pandemic forced businesses to improvise and follow remote working procedures, a lot of data sharing, communication, and other activities are being conducted through cloud services. Although this enables businesses to stay connected and generate revenue regardless of the location of employees, it has a few drawbacks in terms of cybersecurity. In 2022, cloud services are expected to be used by an increasing number of companies as they strive to adopt virtual or hybrid solutions even after the pandemic’s restrictions.

On one hand, cloud services allow scalability and flexibility in business processes. On the other hand, they create risks of cyber attacks and data breaches. 2020 saw more data breaches through cloud systems as compared to on-premises storage. This means that banks and financial institutions will have to take necessary countermeasures to secure their cloud systems and confidential information. In order to avoid data breaches, businesses must not leave out any gaps in their security systems and raise awareness among their staff to follow the best practices for data privacy.

3. Artificial Intelligence as a Saviour

Considering the cybersecurity trends for 2022, artificial intelligence has become increasingly necessary to establish a strong frontier against cyberattacks. In 2020, 47.3% of companies had a medium to high-security automation level, which was a significant increase as compared to 39% in 2019. The basic concept behind AI comes into play here, as experts suggest that the higher the level of automation, the more secure a business system will be.

An officer in charge of security can make errors like falling prey to a phishing email, but today’s advanced AI systems can easily detect such attacks. Automation of security systems also reduces the risk of internal threats as a lesser number of humans will be able to leak confidential information. Moreover, AI allows much more accuracy in analyzing risk as compared to humans.

4. Securing the Supply Chains

A number of cybersecurity concerns are raised due to loopholes and insufficient security protocols in supply chains. These ultimately give way to numerous false allegations on vendors and third parties. However, the industry has responded to this with a positive approach to improve vendor management as a cybersecurity measure. This is being considered as one of the key focus areas for 2022, starting from the disclosure of business information. Despite cloud service providers claiming that a centralized storage system is far more secure, the coming year will prove that this is not true.

As seen from reports of cyberattacks involving cloud storage, the current business operations actually turn out to be the opposite of secure. Businesses will need to incorporate KYB (Know Your Business) measures to verify their partners, third-party vendors, and suppliers. Unless companies put it all on the table at the start of the collaboration, they are welcoming cyber attackers to breach their data. For example, such exposure was created by Amazon in a reported event where AWS appliance installations were hacked. Therefore, it’s clear that 2022 will see more cyber threats unless work is done to improve security.

5. Identity-based Security Protocols

As the techniques of fraudsters continue to evolve, personal information on digital platforms is becoming increasingly vulnerable to cybercrime. To overcome the theft of financial information, digital banking platforms will need to incorporate identity verification measures. With the new methods of hybrid work and the transfer of major business data to cloud applications, the importance of identity verification is further justified. Although the concept in itself is nothing new, the urgency for cybersecurity will force its adoption in companies.

As most cyberattacks begin with a stolen identity, managing the access protocols will be a key aspect in maintaining a business reputation. Misuse of credentials and data breaches will mean the end of small businesses if the modern cyber attackers capitalize on the loopholes in their system. Business directories and employee registries must be configured with security barriers like 2-factor authentication and transaction monitoring systems should be incorporated to detect suspicious activities.

Key Takeaways

Sooner or later, banks, financial institutions, and businesses will need robust identity verification solutions to eliminate the root cause of cyberattacks. Onboarding of legitimate individuals can only be ensured when the company knows who they are every time they try to access the system. Based on the trends, data breaches and ransomware are not going to be eliminated any time soon.

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Talk to experts

How Real ID Act enables Digital KYC Services for US Customers?

Why Real ID Act was needed?

What does Real ID Act entail?

KYC Services Supported by Real ID Act

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KYC Compliance: Give Your Business a Competitive Advantage by Doing it Right

AML & KYC Compliance: 5 Ways AI is Supporting the Fight Against Financial Crimes

The Urgency for Know Your Customer’s Customer (KYCC) in Businesses

1. Phishing Attacks to Remain a Major Issue

2. Internal Threats & Cloud Attacks

3. Artificial Intelligence as a Saviour

4. Securing the Supply Chains

5. Identity-based Security Protocols

Key Takeaways

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.