What are ID documents?
Various countries issue government-issued identity documents, which may include passports, resident identity cards, or driving licenses. These documents have different names depending on the jurisdiction.
For instance, in India, it’s known as an Aadhaar Card, in the UAE it’s called an Emirates ID, in China it’s referred to as a Pinyin Card, in Europe it’s known as a National Identity Card (NIC), and in the USA it’s called a Social Security Number (SSN), among others.
What is ID verification?
Simply put, it’s a security measure used to ensure that a person is who they say they are, and that the document they provide to support their identity is genuine.
This process is now a standard requirement for Customer Due Diligence (CDD) across various sectors including Banking and Finance, Designated Non-Financial Businesses and Professions (DNFBPs), IT Services, healthcare, real estate, Virtual Assets activities and services, and many others.
What is Digital Identity Verification?
Digital Identity Verification aims to authenticate an individual’s online identity. It employs a range of techniques including biometric verification and facial recognition to confirm that the person is indeed who they claim to be.
What Are the Common Methods of Identity Verification?
Document Verification
Document verification remains one of the primary methods for confirming a person’s identity. It involves scrutinizing the security features and details of the presented ID document.
Biometric Verification
Biometric verification utilizes various biometric data such as facial recognition, voice recognition, iris and retina scanning, and fingerprint matching against a database to verify the identity of the individual.
Credit Bureau-Based Authentication
This authentication method relies on information sourced from credit bureaus, which maintain extensive repositories of consumer credit information including names, addresses, and ID numbers.
Database Identification Methods
Database identification methods gather data from diverse sources, including social media platforms and offline databases, to validate an individual’s identity.
Knowledge-Based Authentication
Knowledge-based authentication (KBA) verifies identity by asking individuals to answer security questions unique to them within a specified timeframe, ensuring only the genuine person can provide accurate responses.
Online Verification
Online verification processes confirm the association between a government-issued ID and the claimant, often utilizing biometrics, artificial intelligence, and human review. Selfie prompts are commonly used to verify that the person presenting the ID matches the photo on the document.
Two-Factor Authentication [2FA]
Two-factor authentication involves a two-step verification process, requiring individuals to provide a token or secondary identification in addition to their password. Examples include receiving prompts on registered email or phone numbers and entering the corresponding token during login.
Device Verification
Device verification confirms the legitimacy of the device used to perform a transaction, enhancing security measures.
The Identity Verification Process
The process of identity verification encompasses several stages tailored to confirm and authenticate an individual’s identity. These stages may vary among businesses based on their specific requirements. The following infographic illustrates the typical flow of the identity verification process.
In summary, the identity verification process involves:
- Assessing identity verification needs
- Determining, implementing, testing, and revising the appropriate identity verification method – whether offline/online, and deciding on the use of APIs.
- Informing customers and requesting necessary documents.
- Receiving, verifying, and validating ID documents.
Additional steps may include screening, risk assessment, ongoing monitoring, and record-keeping.
Why is digital identity verification necessary?
Compliance with Regulations
Adhering to Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) laws worldwide, along with the recommendations of the Financial Action Task Force (FATF), necessitates identity verification to combat money laundering and terrorist financing (ML/TF). Consequently, implementing identity verification programs assists businesses in meeting AML/CFT compliance requirements.
Digital ID Verification
Digital ID verification ensures standardized application of identity verification protocols across an organization. It facilitates easy data retrieval when necessary and integrates APIs with government/regulatory databases to ensure ongoing compliance.
Cost Efficiency
Digital ID verification offers significant cost savings compared to manual verification processes. Automation reduces operational expenses, while digitizing intricate verification procedures minimizes human labor, resulting in overall cost reduction.
Improved Customer Experience
Digital ID verification methods, such as self-service login and quick QR code scanning for verification at kiosks/countertops, enhance customer experience. By eliminating long queues and providing remote access for completing formalities instantly, customer satisfaction and retention rates increase while abandonment rates decrease.
Fraud Prevention
Identity verification plays a crucial role in preventing financial crimes such as identity theft, online scams, and account hacking. By accurately verifying individuals’ identities, organizations can mitigate the risk of fraud infiltrating their systems.
Security Enhancement
Validating individuals’ identities before establishing business relationships enhances security measures. This ensures that only authorized individuals can access services and sensitive information, thereby reducing the likelihood of data breaches and cyber-attacks.
Digital ID Verification Software Features
Identity Verification
Digital ID verification software assists in validating government-issued IDs and conducting biometric selfie comparisons.
Liveness Check
Liveness Check confirms the authenticity of the ID holder through a selfie video, with the option to include various prompts for added security.
Sanctions Check
The software conducts sanctions checks against both UNSC and local sanctions lists, helping to identify potential matches, whether full, partial, or false, in accordance with regulatory requirements.
PEP Check
Equipped with a global Politically Exposed Persons (PEPs) database, the screening software identifies high-risk customers.
Adverse Media Check
The Digital ID Verification Software offers the capability to perform adverse media checks, enabling the identification of associated risks with a customer.
Address Verification
Supporting Optical Character Recognition (OCR), the Digital ID Verification Software validates proof of address documents such as utility bills, bank statements, and property lease agreements, thereby saving valuable time.
Multi-Party Video Verification
Multi-Party Video Verification allows for collective confirmation of KYC information, reducing the risk of impersonation or fraudulent activities.
Customer Due Diligence (CDD) Questionnaire
Customizable KYC forms enable the addition of customer due diligence questions based on regulatory requirements and associated risks.
Biometric MFA
Biometric MFA enhances security by adding an extra layer of protection, making authentication more challenging for unauthorized individuals and mitigating the risk of impersonation.
Phone Verification
Phone Verification facilitates Two-Factor Authentication, enhancing security measures.
Email Verification
Email Verification also supports Two-Factor Authentication, bolstering security protocols.
eSignatures
eSignatures streamline customer onboarding processes and ensure legal compliance.
What is an Online ID Verification Service?
Online ID verification services verify the identity an individual claims to possess by comparing it with corroborating data, typically government-issued documents like passports, driver’s licenses, or resident identity cards. These identity proofing solutions confirm, verify, and validate documents provided by or claimed to be of the individual.
Utilizing APIs, online ID verification services strike a balance between customer experience and security, enabling enterprises to conduct business swiftly, efficiently, securely, and in compliance with AML/CFT, KYC, and sanctions regulations. These laws mandate robust identity verification to prevent penalties for non-compliance.
Traditional Identity Verification vs. Digital ID Verification API
The drawbacks of traditional ID verification processes include:
- Customer abandonment: Traditional methods are often complex and time-consuming, leading to customers abandoning the onboarding process. This is particularly evident when compared to the streamlined experience offered by API-based digital ID verification solutions.
- High Cost: Collecting, scanning, and verifying ID documents manually can be costly, especially when dealing with large volumes.
On the other hand, digital ID verification through APIs offers several advantages:
- Avoiding redundant verifications: With digital ID verification, previously registered customers do not need to undergo repeated verification processes.
- Eliminating physical document checks: API-based verification removes the need for manual verification and cross-checking of physical documents.
- Cost reduction: Implementing digital ID verification APIs can lead to significant cost savings due to reduced operational expenses and increased efficiency.
- Enhanced customer experience: API-based verification ensures a smoother onboarding process, leading to higher success rates and improved customer satisfaction.
Overall, transitioning to a Digital ID Verification API offers enhanced security, accuracy, and scalability, catering to the diverse needs of businesses.
How Can Technology Maximize the Effectiveness of Identity Verification?
Transitioning from traditional methods of ID verification to technology-driven solutions is crucial in today’s era to keep pace with technological advancements.
It’s logical for organizations to optimize resources by implementing fast, efficient, reliable, highly accurate, and compliant methods that can be utilized remotely and in real-time.
Digital identity verification processes incorporate a blend of biometric and AI-driven features, facilitating workflows from ID capture and verification to proof of address and AML screening.
In simpler terms, leveraging technology enhances the effectiveness of ID verification by:
- Decreasing operational costs
- Cutting infrastructure expenses when expanding into new markets without physical presence
- Improving fraud detection capabilities, thereby reducing compliance costs
- Enhancing customer satisfaction and reducing abandonment rates through fully remote and nearly instant access via mobile apps.
How to Choose the Right ID Verification API
Because of strict regulatory demands like customer due diligence, businesses must conduct ID verification during individual onboarding to thwart fraudulent activities and AML/CFT breaches. ID verification Application Programming Interfaces (APIs) serve as efficient tools for this purpose.
What is an API and how does it works?
An API serves as a software intermediary facilitating communication between two applications or software systems through a predefined set of protocols. A common everyday example is the interaction between the Weather Department’s software system, which stores daily weather data and updates, and the weather app on our mobile devices. Through API communication, the weather app accesses real-time weather information from the Weather Department’s system.
Similarly, in the context of AML/CFT compliance, various ID verification and sanctions screening APIs access and retrieve data from lists maintained by organizations like the United Nations Security Council Resolution (UNSCR) and the Office of Foreign Assets Control (OFAC). These APIs enable businesses to screen individuals and entities for compliance purposes against sanctions and targeted financial sanctions lists.
Selecting the suitable ID Verification API
Selecting the appropriate API tailored to your business needs is a critical step, starting with market research to identify APIs that align with your specific requirements. From an AML/CFT compliance perspective, the ideal API should meet several criteria:
- Seamless integration into the onboarding workflow for quick and efficient ID verification while ensuring compliance with local and international AML/CFT regulations.
- Capability to perform age verification for age-restricted products and services like online gaming, online dating, and online gambling.
- Ability to capture IDs using OCR technology and extract relevant information accurately.
- Verification of the authenticity of information extracted from ID documents provided by customers.
- Validation of ID document numbers such as passport numbers, driver’s license numbers, Social Security numbers (SSNs), and Emirate ID numbers across the provided documents.
- Verification of customer-provided phone numbers.
- Ideally, ISO certification and GDPR compliance, with flexible integration options including direct integration, integration via core providers, and integration via third parties.
- Provision of a comprehensive solution for AML/CFT compliance, client onboarding, and client self-service for the customer due diligence process.
- Adequate development support, tutorials, cloud SaaS, usage tier-based pricing, and options for on-premise integration provided by the API provider.
- White-labeling capability to align with the branding and privacy requirements of businesses.
- Ultimately, the chosen API should result in:
- Reduced operational, infrastructure, compliance, and fraud-related costs.
- Lower abandonment rates and a substantial return on investment.
Conclusion
ID verification plays a pivotal role in upholding compliance with AML/CFT laws. Embracing digital ID verification is imperative in today’s landscape, enabling companies to streamline customer onboarding processes and achieve significant time and cost efficiencies.
Effective AML/CFT compliance hinges on robust customer identification and verification practices. Choosing the right AML software facilitates efficient adherence to regulatory requirements, fostering customer trust and supporting business growth.
By leveraging end-to-end consulting services, businesses can identify suitable digital ID verification solutions, assess associated risks, and implement strategies to deliver a world-class customer experience while ensuring compliance with AML/CFT regulations.
