Financial institutions face constant pressure to adhere to regulatory mandates designed to avoid identity fraud and money laundering while still delivering excellent customer service, watching bottom-line results, and meeting business objectives. In today’s complex business environment, this seems like a nearly impossible task. However, those regulatory mandates also create many opportunities to increase efficiencies and save money. By integrating identity verification into the entire risk management strategy, financial institutions can expect to see substantial benefits with their bottom lines, customer service levels, and employee productivity.
What’s identity verification?
Identity verification is defined as “the process of using claimed or observed attributes of a person to infer who the individual is.”(1)
For today’s financial institution, identity verification is really a critical part of establishing a fresh relationship. True identity verification means reviewing the truthfulness of what a prospective customer discloses by screening the info against multiple sources, then analyzing the important points to find out whether a fresh relationship ought to be started. “Know your customer” has long been promoted within institutions as a sign of personalized customer service; however, with the enactment of the USA PATRIOT Act regulations, identity verification has become the difference between success and failure in the ever-changing financial services market.
Exactly why is identity verification very important to financial institutions?
The increased role of the country’s financial institutions in securing the home front must not be undervalued. The purpose behind the USA PATRIOT Act is national security. No-one will disagree that having a much better knowledge of the client conducting business at an establishment provides increased security for the institution, its customers and people in general.
The danger for banks is more than just monetary loss. Injury to a financial institution’s reputation developed by noncompliance and the publicity surrounding terrorists opening accounts can result in lost confidence in the institution and significant loss of customers, sales, and revenue. Coping with negative publicity is really a long, difficult, costly process.
Compliance can’t be ignored because penalties for noncompliance are severe. Regulatory penalties for the USA PATRIOT Act and OFAC regulations can vary from $10,000 to $1 million per infraction.
Just how can a financial institution benefit from the USA PATRIOT Act?
Protecting Against Identity Fraud
Institutions need to avoid identity fraud while balancing the necessity to protect customer information with a customer’s requirement for quick, efficient service. Identity verification is actually a first step in reducing the opportunities for fraud and taking action 안전놀이터. Stopping the “bad guys” from opening a fresh account at an establishment is the easiest and most cost-effective way to reduce a bank’s burden. That’s how “knowing your customer” can help–if identity verification becomes part of the defensive measures within the entire risk strategy, it could be a significant element in preventing fraud.
Increasing Operational Efficiencies
The USA PATRIOT Act has driven financial institutions to review corporate policies and perform lengthy risk analyses. Identity verification technology helps integrate policies into normal routines by allowing frontline workers to gather needed information quickly and efficiently instead of manually researching identity information by calling references and checking websites.
Improving Customer Service
The consummate benefit from integrating identity verification into an institution’s risk management strategy is really a higher degree of customer service.
From airline happen to be school registration to doctor visits, society is accustomed to trading some privacy for the security of every individual and the country. However, customers do expect their financial institutions to protect their identity information and their fiscal assets. Identity verification programs allow new accounts to be opened quickly, making a positive experience for the buyer while showcasing the methodology the institution has in position to protect its customers.
Identity Verification Options
Section 326 of the USA PATRIOT Act requires that financial institutions develop Customer Identification Programs (CIPs) that implement reasonable procedures to
Collect identifying information about customers opening accounts
Verify that the clients are who they say they are
Maintain records of the info used to verify their identities
Determine whether the customers appear on any listing of suspected terrorists or terrorist organizations(2)
There are numerous solutions to greatly help banks implement identity verification programs to adhere to the regulations, always aiming to create educated and proactive decisions about customers. The USA PATRIOT Act regulations allow a documentary or nondocumentary approach.
Documentary Solution
Traditionally, the usage of manual or documentary solutions for identity verification has been prevalent in the financial services community. At many institutions, an employee will look at a driver’s license or passport to begin account-opening procedures. Institutions are counting on driver’s licenses and passports to be valid, but with the recent escalation in forgery, it is difficult to have confidence that the documentation is legitimate.
Nondocumentary Solution
Because the enactment of the USA PATRIOT Act, technology has improved within the area of identity verification. Identity verification technology supplies a simple method of integrating a CIP into an institution’s risk management strategy. Furthermore, identity verification technology gives an establishment a cost-effective tactic for keeping up-to-date with ever-changing regulations.
For true identity verification, it is crucial to screen presented data against multiple independent sources to make sure consistency. Checking one source won’t provide enough information, and there is not one database which includes everyone surviving in the United States. What this means is an establishment must make sure the name, Social Security number, address, and date of birth are valid and associated with one another using various data sources. If the info is unvarying throughout multiple sources, the institution can make an informed decision that it is truthful. By using identity verification technology, organizations might have the various tools, not only to verify identity, but and also to screen against government lists and document transactions. Institutions can completely adhere to the regulations, while also realizing the advantages of protecting against fraud, increasing operational efficiency, and improving customer service levels.
Conclusion
For financial institutions, the USA PATRIOT Act has established many burdens and opportunities. By embracing change and integrating identity verification into their corporate risk policies, institutions can protect against fraud, increase efficiencies, and keep service levels high while remaining profitable.