By David Orme, Senior Vice President at IDEX Biometrics
With cybercriminals becoming ever-more sophisticated, and identity fraud reaching epidemic levels in the UK[1], the need for strict customer identification procedures has never been greater for banks and financial institutions.
Know Your Customer, or KYC as it is commonly known, is a mandatory framework currently in place to protect financial institutions from fraudulent activities, such as identity fraud and money laundering. KYC, reinforced by the fourth Anti-Money Laundering (AML4) directive , requires banks to verify a customer’s identity before an account can be set up in their name. This due diligence includes obtaining the customer’s name, an official headshot and an official document to confirm their identity, as well as a residential address and date of birth. By following the requirements, banks can be confident the customer is exactly who they say they are and have insight into vital customer information, including any potential risks associated with accepting them as a customer.
Inaccurately identifying customers not only leaves the bank vulnerable to fraudulent activity, but also causes serious regulatory headaches, often resulting in a hefty fine. In fact, according to research, global financial institutions were fined $26 billion for AML sanctions and KYC non-compliance since the 2008 financial crisis[2].
Whilst the KYC framework is designed to provide banks with accurate identification information, current paper-based forms of identification such as passports, driving licences or birth certificates can be easily forged, and are timely and expensive to gather.
Bringing KYC processes into the digital ageAs banks continue to move away from traditional branches and face-to-face meetings to online channels of customer communication, financial institutions are under increasing pressure to find ..
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