Customer identification is not an option for some businesses, it’s a must. Ignoring due diligence could get them in legal trouble. This article looks at the types and solutions of ID verification. It also looks at why customer due diligence is critical for financial institutions, and what they should look for while evaluating ID verification services.

Types of ID Verifications

Different companies require different types of ID verifications. The ‘type’ depends on the nature of the business. For example, banks have more security checks and layers, as opposed, say, a website, that simply wants to collect verified email addresses. 

Biometric is the most common form of identity verification. It verifies an individual through one or more unique biological traits. Fingerprints, retina and iris patterns, etc. are the classic methods of biometric verification. Add document verification to it and this combination fortifies the identity verification.

Drivers Licence, passport, a government-issued identity document, are the most common papers used in this process. Additionally, a document issued by a credible organization such as the credit bureau might also be used. 

For instance, if a business would like to; identify an individual online, verify their passport, and then match their live face with the picture on the passport, this can be done in no time. How? Let us show you. Shufti Pro offers a free demo. 

Who Regulates ID Verification Services?  

ID verification services help companies achieve anti-money laundering (AML) and know your customer (KYC) compliance. In the US, the Financial Crimes Enforcement Network Fincen is the main body regulating the compliance procedure. In the UK, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) – under the Financial Conduct Authority FCA –  checks the AML compliance.

Similarly, other countries have their own regulatory bodies that ensure that banks and financial institutes (FIs) follow due diligence. 

What about the Old Form of Verification?

The old style of identity verification, known as knowledge-based authentication (KBA) asks personal questions from the user to verify their identity. This process is still used as an alternative. However, this is not considered as safe; information about someone can be found easily through social media. 

In addition, KBA is slow. Answering questions about someone’s pet’s name or their first school can be irritating. People want instant access; one-touch should unlock phone, doors, start a car, give access to the bank account and on and on.

There are several ways verification solution providers help businesses. Since the majority of businesses operate online, they need services that can be integrated into their business through the internet. 

Integrating Verification Solutions

APIs are used extensively to connect business portals with verification solution providers. These are used for desktops and websites. Similarly, plug and play solutions are available for Android and iOS devices. And in case, a company does not have a team of developers then hosted verification solutions are also available. Check out different integration options at Shufti Pro.

The world demands faster services; faster browsing, faster package delivery, and of course faster verification. Solutions such as Shufti Pro that use artificial intelligence and machine learning verify customers in real time. This is especially helpful for businesses since they fear the loss of revenue from the friction that compliance processes create.

Electronic Identification

Global businesses face an additional challenge; they have to comply with regional as well as international regulations. This can get complicated. Not many identification services can truly call themselves global. Accurate compliance rests on exhaustive legal and technical work, integrated with the business process to ensure streamlined and compliant user experience.

Trustworthy services mitigate risk by taking the burden of customer verification from companies. It also helps reduce revenue losses due to ID fraud. Trust increases which creates an aura of safety around the business. People like to do business with companies they trust, which check all the safety boxes. 

Verification services help increase customer retention and acquisition. They also assist with due diligence. What this means is that services check the customer’s identity across different lists to make sure that the person is not a financial risk to the company.   

Documents Verification

An entire universe of documents is used for verification. For instance, Shufti Pro verifies 3000+ different types of documents. Among other tools, we use optical character recognition (OCR) to read and verify documents. It reads documents – including handwritten notes – like a human.

Data Sources

A truly helpful verification solution should be robust in checking a customer’s identity across sanction lists and watch lists. These include, among others; the anti-money laundering list, anti-terrorism, and politically exposed person (PEP) lists. This highlights the growing need for customer identification. Shufti Pro checks a person’s name across 1000+ sanction lists plus 3000+ databases. Its own AML database updates every 15 minutes to ensure the most accurate compliance.  

Bear in mind that the quality and authenticity of the database the verification reliable. For high-risk transactions government, credit, and utility data sources serve the best. For low-risk processes or as a supplement, the solution providers might use consumer sources.

Customer Due Diligence

What is Customer Due Diligence CDD?

Customer due diligence is a process that helps achieve KYC and AML compliance. Background checks, customer identification, and verification are standard diligence procedures.

What is Enhanced Due Diligence EDD?

Sometimes a customer carries additional risk, and plain due diligence just doesn’t cut it. They might need constant monitoring. Some politically exposed individuals (PEPs) fall in this category.

A credible identity verification service should;

  1. Ascertain the identity and location of the potential customer.  This will not only help to know your customer but it will give you an insight into their business. A combination of biometric verification and document verification is effective in achieving that.
  2. Give you clear and concise reporting. If you have to sift through layers upon layers of useless information before you get to what you were looking for, then you might reconsider your decision. 
  3. Alert you if there is a high-risk profile that might need EDD. Also, check if it has the capability of frequent or consistent monitoring.

An aspect that lies in the periphery is third parties that also need to go through CDD. Your business might have partners and collaborators, which have access to your resources. It makes perfect sense to vet them as well. See if your service takes care of ‘know your customer’s customer’ or KYCC.

The difference between KYC and KYCC is minimal. Only the subject changes in KYCC, it’s your customer’s customer under verification check. Verifying; identity, location, the nature of the business, etc. remain the standard. All of these ensure that your partners are not mixing their dirty money in your business.   

To Conclude

Most businesses find it not only convenient but feasible to hire the services of a credible provider regarding compliance. It surely is a steep climb in keeping up with the latest regulatory changes regarding compliance. But, you should do your due diligence on your potential verification service. Find out who their existing clients are. This is generally a good sign of competent service. Check out Shufti Pro’s client portfolio For ID Verification Services.