What are the benefits of using technology to aid identity verification of a client?

When understood and used correctly, digital identification and verification (“IDV”) systems have the capability to enhance the authenticity, security, confidentiality, and efficiency of identifying clients.

This can be a benefit to many stakeholders, fee earners, individuals within firms, clients, financial and professional services firms, and the integrity of the sector which you operate within.

IDV systems deliver improved individual identification/verification at the time of onboarding by authenticating the identity of customers to assist with compliance with the regulations. In addition, these systems enable other critical controls, including effective ongoing due diligence and transaction monitoring. Consequently, IDV systems can improve efficiency and equip staff with the information to make better informed decision in respect of client due diligence,

What are some of the immediate benefits that jump out to me when we say technology more specifically considering digital Identification and verification? Briefly, they are:

-         deterrent to criminals

-         efficiency

-         multiple source screening

-         internal controls consistency

-         enable remote/distance without interruption

There are also dangers to using technology (such as over reliance, lack of understanding, human execution error, unauthorized credential use, cyber security, lawyers and clients are unfamiliar with the technology approach and the exclusion of individuals) so ensure you balance the pros and cons and assess the risks. The objective of technology is to equip employees with the knowledge and information they need to support them and mitigate the risk exposure of the firm and employees alike.

Let’s focus on two of the main benefits of using IDV systems:

Minimise reliance on human control measures

Traditional methods of undertaking CDD specifically identification and verification of a client predominantly, if not entirely, relied upon human control measures. Comparing a photograph on a government issued id with the person in front of you that you met face-to-face at a meeting, making a judgment that the identity document is genuine or fake and that the person presenting themselves in the meeting was a true likeness. The risk is that staff on the front line may not have access to the right tools, training, skill sets, and experience required to reliably identify counterfeit, doctored or stolen documents or in identifying key features. I mean did you know, one of the best body parts to focus on when comparing a true likeness is the ears! Who knew, we all live and we all learn!

By using technology, we mitigate the risk of human error in identifying and verifying the identity of an individual.

At the end of the day, we are all human we all make mistakes, some days our eyes are naturally keener than others, some days we have more time to spend considering. Most of us are not specialists, we are not the Police or Customs we don’t receive massive amounts of training on fraudulent documents. One thing we do all do is try our very best. I have not, to this day, met a professional who has openly admitted to not trying. Some forgeries are easy to spot but it’s not those ones we are worried about, we are worried about the sophisticated ones, the ones that are trickier. The ones maybe a naked eye might not spot or identify. The borderline ones!

These risks are further increased in the day and age we currently operate within, when you don’t see the original, you can’t feel the quality and thickness of paper for example.

Technology can play a massive role in firms been confident that it is doing all it can to mitigate the risk and placing a control in place that is not reliant on a natural person.  

Technology can improve client experience and save costs and time spent for both the clients and firms

Pioneering IDV systems can allow for a user-friendly smooth client journey and experiences for prospective customers at onboarding stage, and during the entire course of the transaction by offering a quick and seamless due diligence process can aid firms in the ongoing monitoring obligations without been overly burdensome on individuals within the firm. It can allow the firm to tailor their attention to the client and matters which need attending to first.

Smooth, efficient, speedy, client and firm driven technology, resulting in an accurate verification process for client and regulated entities, can help lower on-boarding costs drastically.

How does technology manage some of the risks noted (these will be unique to the provider and not all may apply to every provider)?

-         Minimal data entry

-         saves time when onboarding clients

-         safeguards your firm (often uses government-grade technology)

-         access data sources unavailable without provider

-         checks are consistently applied

-         seamless experience for clients

-         digitally confirms identity

-         secure

-         confidence the client is who they say they are

-         hard to spoof

-         remotely – access and verification anywhere

-         often takes minutes

-         relieves potential stress of meetings, printing, posting documents

-         continuously improving and reacting to fraud trends

-         easy for professionals and clients alike

A firm’s technology can be a great line of defense against being targeted by money launderers and a great internal support for staff.

The use of electronic identification and verification tools are now utilised by most firms to some extent. While you can never outsource your ultimate responsibility, adding technology solutions to your arsenal can assist in protecting your firm and staff and mitigating the risk. Understanding the digital tools, you are using (their sources of data, how risk scores are formulated etc) is critical in assessing the extent to which risks are mitigated in the due diligence process. Understanding your specific tool in detail to the degree that you could answer key questions confidently. Don’t rely on anything you don’t understand!

Technology is an amazing aid that can make on-boarding a smoother, easier, more comprehensive user experience. It is not yet at a place where a fee earner responsibility or compliance teams responsible can be totally negated! There is still a requirement of consideration, considering all the information at hand that has been collated. Technology cannot act upon the results, yet. I mean watch this space! Ultimately, we live in a world that’s fast paced and changes come fast, and we are seeing constant developments. Who knows what the future holds!

Technology is an invaluable aid to assist us in the fight against money laundering and the criminal gangs who are becoming more and more sophisticated.