In the past, whenever someone wanted to open a new account at a financial institution, it involved a lengthy process. First, the person had to fill out an application form that was used to collect any relevant personal information, such as name, address, occupation, and income. And, to prevent account opening fraud, financial institutions would request for a valid government-issued ID, such as a driver’s license, birth certificate, Social Security Number, or some combination of these documents. The identity documentation would have to be presented at a physical branch location. In addition, depending on the type of financial service being applied for, a credit history check would also be requested from a credit bureau.
All of this paperwork and documentation checking has generally been effective for quite some time, but in the current digital age, consumers and businesses expect to transact online in real-time and the products and services that can meet this demand are winning. Instead of being restricted to business hours and fixed office locations, people can now quickly and easily apply for most financial services from the comfort of their own home at any time of day or night.
The ability to apply for accounts online is very convenient for consumers, but where does that leave financial institutions in terms of fulfilling their customer due diligence obligations?
Different Requirements, Common Approach
Depending on the country or region, the requirements for confirming customer identities can vary slightly. For example, in the U.S. and the UK, regulators in both countries take a fully risk-based approach. This means that they allow regulated entities to determine the best method to carry out identity verification depending on the level of risk that they are exposed to. On the other hand, while Canada takes a risk-based approach for anti-money laundering (AML) and counter-terrorist financing (CTF), it is more prescriptive with regards to identity verification. Unlike the U.S. and the UK, Canada specifies the type of identification product that can be used.
Despite these differences, there are similarities when it comes to the type of information that is being verified. When verifying the identity of a client who has applied online rather than in-person, there are certain elements that must be checked. The person’s full name, date of birth, and address all must be confirmed as authenticated.
Two, Three, Four, Five... Data Sources are Better than One
Most commonly, credit bureaus have been traditionally used as the principle means of verifying client’s identities in the world of financial services. Although reliable, there are instances when a specific credit bureau data source may not be available.
In cases like these, it pays to have more than one option at your disposal. It’s important to build confidence and certainty while mitigating risk and staying compliant with anti-money laundering (AML) and know your customer (KYC) regulations. The most robust identity verification platforms leverage multiple sources of data for each jurisdiction, ensuring that clients can accurately verify their customers at any time.
“As consumers make the shift from bricks-and-mortar to digital banking, compliance teams need to adapt,” said Jon Jones, President at Trulioo. “With access to comprehensive online identity verification platforms at their fingertips, financial services can stay ahead of the curve and be ready for international growth. Consumer engagement and enablement begins with trust, and trust often begins with KYC.”