FinCEN and FDIC to Test the Effectiveness of Digital ID Verification Tools
Two federal regulators – the FinCEN and FDIC have called for a ‘tech sprint’ to assess the effectiveness of digital identity verification tools.
Considering the challenges faced by the financial services industry including the proliferation of online scams, data breaches, and synthetic identity frauds, the two federal regulators are gearing up for a ‘tech sprint’.
The Financial Crimes Enforcement Network (FinCEN) and the Federal Deposit Insurance Corporation (FDIC) have joined hands to hold the tech sprint aimed at analyzing the effectiveness of digital identity verification systems.
In the announcement published on Wednesday, 12 January, digital identity verification was referred to as the process of collecting, validating, and verifying information about an individual. This information is usually used by financial institutions to get proof of identity when customers attempt to gain access to online services.
With the financial services sector increasingly shifting to online platforms, scammers and fraudsters are inventing new techniques to commit financial crimes.
According to the two federal regulators FinCEN and FDIC, data breaches and hacks involving personally identifiable information (PII), as well as the increasing “synthetic identities” (a type of scam where someone creates a new identity from a combination of real and fake information) have made it increasingly difficult to establish real identities.
Although the tech sprint doesn’t have a specific start date, it is said that it will require participants to come up with a “scalable, cost-efficient, risk-based solution to measure the effectiveness of digital identity proofing to ensure that individuals who remotely (i.e., not in person) present themselves for financial activities are who they claim to be.”
Both the FDIC and FinCEN have a common goal of increasing security in the online financial services industry by reducing identity theft and fraud and combatting money laundering/terrorism financing. The regulators aim to restore customer confidence in the financial sector.
Suggested read: FinCEN and OCC Fine Texas Bank $9 Million for BSA-AML Violations
