How electronic identity verification helps fight financial crime

As criminals develop increasingly sophisticated methodologies to launder money, commit fraud, and fund terrorist activities, demand for effective AML/CFT software grows. Financial crime is a global threat meaning that banks and financial institutions must ensure they are able to accurately use Electronic identity verification (EIV) to verify the identities of their customers, wherever they do business. 

Electronic identity verification (EIV) and real-time identity verification tools represent two useful ways for financial service providers to establish the identity of their customers quickly and easily. The practice of customer identity verification, known in financial contexts as Know Your Customer (KYC), is an important AML/CFT obligation: customers that are not adequately identified, or that are identified incorrectly, can more easily evade AML/CFT controls and exploit financial products to commit crimes.

In order to detect and prevent money laundering and other financial crimes, and avoid costly compliance penalties, firms should understand the importance of electronic identity verification and real time identity verification within their AML/CFT solution.

What is electronic identity verification?

Electronic Identity Verification (EIV) is an AML tool designed to provide important identifying details about the clients of banks and financial institutions. Those identifying details may be difficult to obtain as part of the standard KYC process (or simply unavailable) but represent important data points for building a customer’s AML risk profile. The more a financial institution knows about its customers, the less likely it is that those customers will be able to engage in financial crime. 

Basic identifying information required by the KYC process includes: 

• Customer name
• Photographic ID
• Address
• Birth certificate
• Passport details
• Company incorporation documents

Identifying information that can be obtained using EIV tools to enrich customer risk profiles includes: 

• Educational and industry qualifications
• Professional certifications
• Financial information 
• Negative news stories
• Social media data
• Internet forum posts

EIV can also be used to provide financial institutions with audit records in order to further enrich KYC risk ratings or contribute to AML investigations.

What is real-time identity verification?

Reliable, instant, and effective, real time identity verification builds on the capabilities of EIV and represents a safer and more secure method of collecting identifying information. 

Implemented effectively, real time verification systems provide firms with the most up to date information about their customers, enabling round-the-clock data collection from locations around the world, without contravening security and privacy regulations. Real time identity verification software can also be implemented across any device to reflect the ways in which customers engage with a financial institution’s products and services.  

Given its advantages, a majority of financial institutions (especially banks) have implemented real time electronic identity verification as part of their KYC infrastructure. 

Why is this software important?

Modern AML/CFT regulations require financial institutions to collect and analyze vast amounts of customer data, while financial crimes often occur quickly, cross international borders, and involve digital platforms. In this climate, criminals may be able to outpace conventional AML/CFT controls, while manual KYC represents an unmanageable administrative burden for firms and increases the possibility of costly human error. 

With that in mind, the key benefits of real time electronic identity verification include:

• Customer risk profiles: Real time identity verification software enables firms to keep pace with financial criminals, identifying, sorting, and prioritizing relevant data points in order to build more accurate customer risk profiles. 
• Suspicious activity: Real time verification enables firms to react quickly when suspicious activity is detected, ensuring that financial crimes are not only identified but prevented. 
• Regulatory change: Real time identity verification software also represents a way to manage the unexpected threats that evolving criminal methodologies present, and adapt to the constantly changing landscape of financial regulation. 
• Global compliance: By extending the scope of their KYC solutions, real time verification helps firms achieve global AML/CFT compliance, and so engage with a broader range of customers.

Electronic identity verification tools, including real time verification, have become an essential compliance asset and should be a priority when building an effective AML/CFT solution. However, identity verification is not a one-size-fits-all KYC solution. Firms should consider a variety of important factors when implementing their software, including their budget, risk tolerance, and jurisdictional regulatory obligations. 

ComplyAdvantage’s real time identity verification software is designed to help you meet your KYC compliance obligations quickly and cost-effectively, and to provide ongoing protection for both your business and your customers.