Modern Identity Verification

Mark Halstead Compliance

Identity verification is an essential part of doing business today - both for firms with anti-money laundering obligations and many others. In simple terms, ID verification allows you to check that somebody is who they say they are. For banks and financial institutions, this process is also known as Know Your Customer (KYC).

In most cases, the identity verification process involves reviewing a person's identity documents. The individual concerned may also need to complete various forms to provide additional information pertaining to their identity.

In this article we explain the importance of identity verification, and explore how valid checks can be administered online.

Why Does Identity Verification Matter?

Identity verification is an essential part of any anti-money laundering regime. The process allows organisations to authenticate a person's true identity by cross-checking the individual's documents with the data they already possess. ID verification is a document-intensive exercise, and can involve checks on birth certificates, National Insurance numbers, driver's licences, and other forms of photographic and non-photographic ID.

Identity checks can prevent fraud, secure sensitive information, and ensure compliance with legal duties. They are used by a broad range of financial institutions, travel providers, and vendors - but they're also deployed by all UK employers when conducting Right to Work checks.

Which Regulations and Standards Apply?

The rules and standards the apply to identity verification are well-established, but online verification services tread a new line between the data security and preventing identity fraud.

The key bodies of law that govern identity verification are the Fifth Anti-Money Laundering Directive (5AMLD) and the Electronic Identification Authentication and Trust Services Regulation (eIDAS).

5AMLD is focused on the prevention of fraud, identity forgery, money laundering, and terrorist financing. It imposes controls on businesses that are involved in financial transactions, and sets out the obligations incumbent on organisations to prevent criminal behaviour. eIDAS contains provisions that relate to the use of electronic signatures, trust services, and online transactions.

Together, these regulations create an effective framework for the operation of identity verification services in the UK and the EU.

How Does Online Identity Verification Work?

It has long been best practice to check the documents of those you deal with in a financial transaction, but recent events have bolstered the need for digital identity verification. When conducting checks remotely, it becomes even more important to follow the correct processes and procedures.

The online identification verification process is broadly similar to the checks that you might expect from an in-person meeting, with the exception of a few key differences. Firstly, it requires the use of a live video stream so the person conducting the check can see both the subject and a valid identity document. In some cases, individuals may also be required to provide an electronic signature or provide face authentication using technology that is similar to the systems used for unlocking smart phones.

With Red Flag Alert's digital AML check service, the online identity verification process is simple:

  1. To begin with, the AML officer enters a customer's basic details into an online form.
  2. The customer is then sent a branded email that directs them towards an online portal where the verification process can be completed.
  3. Customers are instructed to two identity documents using the camera on their device. This means that these checks can be completed on the go, and without the need to access a scanner. The following documents can be used:
  • Passport
  • Driving License
  • Meter Point Administration Number (MPAN) number
  • European ID Card

 

  1. Red Flag Alert's AI application identifies, verifies, and securely stores the key data from the customer's documents.
  2. The system returns a pass or fail. In the case of a fail, the business can go on to file a Suspicious Activity Report (SAR) with the National Crime Agency.
  3. Customer data can also be inputted manually, making it easy to finalise checks in cases where you already have the relevant details.

The process is fast, efficient, and can be conducted remotely over the internet without the need for customers to attend in person for identity checks to take place.

Use Cases and Applications

Since the advent of lockdowns and social distancing at the beginning of the COVID-19 pandemic, digital solutions have become an ever more important part of our day to day lives.

The trend towards online business has carried over into the world of AML compliance and identity verification, and various organisations have been forced to find new ways to conduct Know Your Customer checks. The following industries in particular have experienced increased demand for digital ID checks:

  • Banking and financial institutions that are required to verify the identity of their customers before completing transactions or opening new accounts.
  • Government departments and public authorities that require customer ID validation when issuing new documents and assessing applications for financial support and other assistance.
  • Private companies when conducting Right to Work checks during onboarding and throughout the procurement process.

Preventing Fraud with Online ID Verification

The world is changing and business has gone online. While many organisations have adapted to the new normal by conducting identity checks using webcams and conferencing software, that is by no means a permanent or fully secure solution.

By using AML checks from Red Flag Alert, businesses can benefit from an easy automated process that conducts the necessary KYC and document verification checks without the need for a Zoom call. It's a simple and highly secure process that allows firms to comply with all relevant regulatory standards while providing a fast and efficient user experience for everyone involved.

When used in conjunction with Red Flag Alert's wider suite of AML compliance tools, organisations can count on:

  • Full identity verification
  • Enhanced due diligence
  • Real-time screening for PEPs and sanctions
  • A full range of risk level checking
  • A secure audit trail

For a better approach to identity verification, contact Richard West at richard.west@redflagalert.com or on 0344 412 6699.

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Mark Halstead Mark Halstead Partner

Mark's experience is big data analytics, financial services and building businesses provides Red Flag Alert with strategic direction.