The TIC Company
The digital world has made it easier than ever for people to connect with each other and share information. However, it has also made it easier for criminals to commit identity theft and other crimes.
We know fraudulent identities can be used to enable money laundering, and this has serious human, as well as massive financial impacts. Just across the ditch in Australia, The Australian Criminal Intelligence Commission considers identity crime as an enabler of organised crime which costs Australia around $36 billion annually. And these financial costs are reflected in countries all around the world.
In this article, we’ll explore the use of digital identity verification in the fight against money laundering and financial crime, and how you can choose to incorporate it into your AML programme.
What is digital identity verification
Digital identity verification is the process of confirming that someone is who they say they are online. There are a number of ways to do this, including looking up public records, and using biometric data.
Most people have a driver’s license or passport, and government databases of these records can be accessed to understand somebody’s identity. These records will help confirm who you are, using various identity components such as name, address, date of birth, and photos.
Difference between digital verification and document verification
With digital verification you can verify documentation at source data, and can look up relevant identification documents, e.g., passport.
With document verification you are only looking at the document for a match, and put all your trust in that document.
The Amended Identity Verification Code of Practice 2013 (IVCOP) allows for both versions of checks, but different checks are better for some entities than others depending on risk and nature of client.
Digital verification is generally more expensive than documentary verification as you will need to use a provider such as Cloudcheck to help verify name and date of birth electronically. However, the overall costs saved in time, and the accuracy of automation can be critical when dealing with high-risk clients or complicated situations.
How digital identity verification works
You will need to have access to an electronic identification verification tool so you can enter customer details to be compared to a verified data set and/or selected data sources and sanction lists. This process will help identify whether a person is who they say they are, and whether there are any restrictive measures held against them.
There are several benefits to digital verification including:
Speed of results
Access to appropriate databases
However, this is no set and forget process. You will need to understand how to use the software and actively analyse results and complete checks. You will also need to understand how the electronic sources meet the requirements of the July 2021 Explanatory Note on electronic identity verification.
Will the cost and benefits of digital verification outweigh the time burnt using the document verification method?
Technology is not the complete solution. You will still need to carry out compliance checks and be closely involved in managing your compliance programme.
You can run checks yourself using the appropriate databases, but it still takes time and expertise. Leaving it to an outsourcing partner can mean you have more time to manage your other compliance activities.
Select the right solution
If you can carry out digital identity verification, do it. It’s a great solution to help with your AML compliance requirements, but do think about costs vs benefits, and remember this doesn’t mean your compliance burden is removed. It’s not a magic wand, but it will help, providing you use it wisely.
And there is always an exception to the rule – not all clients will be able to provide the necessary information for a digital identity check. For example, if your client doesn’t have a passport, or a driver’s license, you will need to have an exceptions procedure in place, and manage that potential risk in other ways.
So, embrace digital identification as part of your AML programme, but make sure you have a dedicated compliance officer managing it, or use an AML outsourcing provider to run complete CDD checks for you. They will also be able to provide expert analysis to understand results, and provide advice to manage and mitigate any risks.
A company like TIC. Co will also have the expertise to get those trickier CDD cases over the line. Contact us for more information or guidance.