As technology continues to advance, businesses of all sizes face increasing pressure to ensure the safety and security of their customers' personal information. The most critical aspects outlined include Know Your Customer (KYC) and Anti-Money Laundering (AML), both of which include the process of confirming a person's identity by collecting and analysing information about them. Identity verification is essential in industries such as finance and healthcare, where the risks of identity theft and fraud are high. However, it is also becoming increasingly important in other sectors, such as law, real estate and even social media.
The need to verify identity varies depending on the industry and the type of transaction. Generally, businesses should verify identity when there is a risk of fraud or illegal activity. Here are some examples of when identity verification is necessary:
Opening a new bank account or signing up to a new service: Businesses should verify the identity of customers when they open new accounts. This helps to prevent identity theft, duplicate accounts and fraudulent account creation.
Conducting high-risk transactions: Certain transactions, such as large financial transactions, should be subject to identity verification. This helps to prevent money laundering and other illegal activities.
Changing account information: If a customer requests changes to their account information, such as a change of address or phone number, the business should verify their identity to prevent fraud.
Accessing sensitive information: If a customer requests access to sensitive information, such as medical records or financial information, the business should verify their identity to prevent unauthorised access.
We've found in some cases, businesses are using identity verification to ease the customer onboarding journey and comply with regulations simultaneously. Using AI-powered platforms such as Personr, customers no longer need to input their details upon signup and instead simply snap a photo of their drivers license, passport or utility bill. Our platform extracts the necessary data and provides the information to the business, all in a safe and secure environment.
In recent years, governments around the world have been introducing, amending and changing regulations which require businesses to verify the identity of their customers. Whilst it can be difficult to keep up with what you're liable for as a business, here are some changes that will require unregulated industries to start verifying identities:
The EU's Fifth Anti-Money Laundering Directive: This directive, which came into effect in January 2020, requires businesses in the EU to perform identity verification checks on their customers. This includes businesses that were previously exempt, such as crypto exchanges and art dealers.
The US Financial Crimes Enforcement Network's (FinCEN) proposed rule on beneficial ownership: FinCEN has proposed a new rule that would require businesses to verify the identity of their beneficial owners. This rule would apply to all businesses that are not currently subject to beneficial ownership requirements, such as sole proprietorships and partnerships.
The UK's Digital Economy Act: The Digital Economy Act, which was passed in 2017, requires age verification checks on all websites that provide adult content. Although this requirement has not yet been enforced, it is expected to come into effect soon.
In Australia, we've seen a flurry of cyberattacks on well-known household names which has caused the government to pursue creating its' own cyber-agency to govern and investigate firms that have been breached. Additionally, proposed changes to regulation will require more industries to start verifying individuals, such as law firms and accountants.
With recent technological advancements and changes to regulation, verification is becoming increasingly important and more accessible in a wide range of industries. Additionally, with the introduction of new regulations, businesses that were previously exempt from requirements will soon be required to implement these measures.