• Barley Laing, UK Managing Director at Melissa


• 07.10.2021 11:15 am
#AML #KYC #ID #verification

The ability to conduct financial business on the web brings convenience, efficiency, and more to the masses. Unfortunately, online transactions have also unleashed a substantial increase in fraudulent activity, which has governments and regulators around the world concerned. Research from TransUnion recently found that fraud in financial services increased 149% globally when comparing the last four months of 2020 with the first four of 2021.

Although a wide variety of anti-money laundering (AML) and know your customer (KYC) directives, regulations, and laws exist, they are not unified in their focus and implementation. While such harmonisation would be ideal, it’s unlikely to happen. Instead, different legislation and directives of varying vigour will become the norm, posing a potential barrier to those financial services businesses looking to operate globally in an increasingly digital world.

If they fall foul of these laws, which are becoming progressively more stringent, they could be hit with huge fines and reputational damage beyond the borders in which the infringement has taken place.

A best practice approach to ID verification can help financial services organisations avoid breaking local AML and KYC laws and regulations, whilst also targeting global growth.

ID verification – in real time

An electronic identity verification (eIDV) service provides the foundation to achieving cross-border AML and KYC compliance. Automated eIDV enables real time cross-checks of contact information supplied by the prospective customer – their name, telephone number, email address, or home address – at the onboarding stage. However, for eIDV to work effectively, it must have access to a global dataset of billions of records, including government agency, credit agency, and utility records, as well as politically exposed person (PEP) watchlists. Only then can those in financial services be confident that they are compliant with existing local AML and KYC regulations, whilst also ensuring no negative impact on the customer journey.

Retrospective ID investigation

Previous onboarding procedures may be insufficient for contemporary AML and KYC regulations. Neglecting your historic customer contact data can put your organisation in serious jeopardy of not meeting new regulations. The ability to undertake retrospective ID investigation on a global level solves this conundrum.

There are two ways to deal with retrospective ID investigation. The first method involves actively engaging with existing customers, not only to ensure compliance, but to gain further insight and updates for use in future targeting efforts. However, this approach is costly for the business and involves additional administrative communication that can irritate customers.

The second option employs existing technology, such as eIDV - that delivers real time checks behind the scenes at the onboarding stage - to undertake ‘live re-onboarding.’ An eIDV tool can commence high volume retrospective ID processing to ensure compliance with the more stringent AML and KYC regulations – without the need for customer engagement.

Proving authenticity without human involvement

For ‘live re-onboarding’ to work, banks need access to scanned customer ID documents, such as driving licences, passports, and utility bills. These are already likely stored per customer due diligence parameters. However, only by using the appropriate optical character recognition (OCR) and machine readable zone (MRZ) technologies is it possible to eliminate costly physical checks and the potential for human error to determine whether the scanned ID document is authentic and valid in real time. OCR and MRZ technologies are also crucial to the real time onboarding of new customers, with prospects scanning or taking photos of their IDs and sending them to the financial services organisation for evaluation. Additionally, the photo ID embedded in these scanned documents supports biometric ID verification, such as facial recognition, which helps those in financial services securely speed up engagement with customers.

Artificial Intelligence (AI) + eIDV = better compliance

AI is set to play an increasingly important role in eIDV, by helping to deliver KYC and AML compliance. One form of AI, semantic technology, associates words with meanings and recognises the relationship between them. The machine reasoning and automated pattern recognition provided by this technology can identify possible fraudulent applications in real time. Also, through semantic technology, it is possible to apply context and make inferences with data; this ensures properly validated identities as well as broader data quality and integrity.

With AML and KYC regulations increasing worldwide, it is essential that financial institutions serious about global growth leverage an eIDV tool with document verification and biometric technology built in. Along with its speed, efficiency, and cost benefits, eIDV empowers banks to deliver best practice ID verification methods on a global scale for superior, no-hassle compliance.