| Financial institutions face constant pressure to | | | | The consummate benefit from integrating identity |
| comply with regulatory mandates designed to | | | | verification into an institution's risk management |
| prevent identity fraud and money laundering while | | | | strategy is a higher level of customer service. |
| still delivering excellent customer service, watching | | | | From airline travel to school registration to doctor |
| bottom-line results, and meeting business | | | | visits, society is accustomed to trading some |
| objectives. In today's complex business | | | | privacy for the security of each individual and the |
| environment, this seems like an almost impossible | | | | country. However, customers do expect their |
| task. However, those regulatory mandates also | | | | financial institutions to protect their identity |
| create many opportunities to increase efficiencies | | | | information and their fiscal assets. Identity |
| and save money. By integrating identity | | | | verification programs allow new accounts to be |
| verification into the overall risk management | | | | opened quickly, creating a positive experience for |
| strategy, financial institutions can expect to see | | | | the consumer while showcasing the methodology |
| substantial benefits to their bottom lines, | | | | the institution has in place to protect its |
| customer service levels, and employee | | | | customers. |
| productivity. | | | | Identity Verification Options |
| What is identity verification? | | | | Section 326 of the USA PATRIOT Act requires |
| Identity verification is defined as "the process of | | | | that financial institutions develop Customer |
| using claimed or observed attributes of an | | | | Identification Programs (CIPs) that implement |
| individual to infer who the individual is."(1) | | | | reasonable procedures to |
| For today's financial institution, identity verification | | | | - Collect identifying information about customers |
| is a critical aspect of establishing a new | | | | opening accounts |
| relationship. True identity verification means | | | | - Verify that the customers are who they say |
| reviewing the truthfulness of what a prospective | | | | they are |
| customer discloses by screening the data against | | | | - Maintain records of the information used to |
| multiple sources, then analyzing the facts to | | | | verify their identities |
| determine whether a new relationship should be | | | | - Determine whether the customers appear on |
| started. "Know your customer" has long been | | | | any list of suspected terrorists or terrorist |
| promoted within institutions as a sign of | | | | organizations(2) |
| personalized customer service; however, with the | | | | There are numerous options available to help |
| enactment of the USA PATRIOT Act regulations, | | | | banks implement identity verification programs to |
| identity verification is now the difference between | | | | comply with the regulations, always aiming to |
| success and failure in the ever-changing financial | | | | make educated and proactive decisions about |
| services market. | | | | customers. The USA PATRIOT Act regulations |
| Why is identity verification important to financial | | | | allow a documentary or nondocumentary |
| institutions? | | | | approach. |
| The increased role of the country's financial | | | | Documentary Solution |
| institutions in securing the home front must not | | | | Traditionally, the use of manual or documentary |
| be undervalued. The purpose behind the USA | | | | solutions for identity verification has been |
| PATRIOT Act is national security. No one will | | | | prevalent in the financial services community. At |
| disagree that having a better understanding of the | | | | many institutions, an employee will look at a |
| customer doing business at an institution provides | | | | driver's license or passport to begin |
| increased security for the institution, its | | | | account-opening procedures. Institutions are relying |
| customers and the public in general. | | | | on driver's licenses and passports to be valid, but |
| The danger for banks is more than just | | | | with the recent increase in forgery, it is difficult to |
| monetary loss. Damage to a financial institution's | | | | have confidence that the documentation is |
| reputation created by noncompliance and the | | | | legitimate. |
| publicity surrounding terrorists opening accounts | | | | Nondocumentary Solution |
| can lead to lost confidence in the institution and | | | | Since the enactment of the USA PATRIOT Act, |
| significant loss of customers, sales, and revenue. | | | | technology has improved within the area of |
| Recovering from negative publicity is a long, | | | | identity verification. Identity verification technology |
| difficult, costly process. | | | | offers a simple approach to integrating a CIP into |
| Compliance cannot be ignored because penalties | | | | an institution's risk management strategy. In |
| for noncompliance are severe. Regulatory | | | | addition, identity verification technology gives an |
| penalties for the USA PATRIOT Act and OFAC | | | | institution a cost-effective tactic for keeping |
| regulations can range from $10,000 to $1 million | | | | up-to-date with ever-changing regulations. |
| per infraction. | | | | For true identity verification, it is critical to screen |
| How can a financial institution benefit from the | | | | presented data against multiple independent |
| USA PATRIOT Act? | | | | sources to ensure consistency. Checking one |
| Protecting Against Identity Fraud | | | | source will not provide enough information, and |
| Institutions need to prevent identity fraud while | | | | there is no single database that includes everyone |
| balancing the need to protect customer | | | | living in the United States. This means an |
| information with a customer's requirement for | | | | institution must confirm that the name, Social |
| quick, efficient service. Identity verification is | | | | Security number, address, and date of birth are |
| clearly a first step in reducing the opportunities for | | | | valid and associated with each other using various |
| fraud and taking action. Stopping the "bad guys" | | | | data sources. If the information is unvarying |
| from opening a new account at an institution is | | | | throughout multiple sources, the institution can |
| the easiest and most cost-effective way to | | | | make an educated decision that it is truthful. By |
| reduce a bank's burden. That's how "knowing your | | | | using identity verification technology, organizations |
| customer" can help--if identity verification | | | | can have the tools, not only to verify identity, but |
| becomes part of the defensive measures within | | | | also to screen against government lists and |
| the overall risk strategy, it can be a significant | | | | document transactions. Institutions can completely |
| factor in preventing fraud. | | | | comply with the regulations, while also realizing the |
| Increasing Operational Efficiencies | | | | benefits of protecting against fraud, increasing |
| The USA PATRIOT Act has driven financial | | | | operational efficiency, and improving customer |
| institutions to review corporate policies and | | | | service levels. |
| perform lengthy risk analyses. Identity verification | | | | Conclusion |
| technology helps integrate policies into normal | | | | For financial institutions, the USA PATRIOT Act |
| routines by allowing frontline workers to gather | | | | has created many burdens and opportunities. By |
| needed information very quickly and efficiently | | | | embracing change and integrating identity |
| instead of manually researching identity | | | | verification into their corporate risk policies, |
| information by calling references and checking | | | | institutions can protect against fraud, increase |
| websites. | | | | efficiencies, and keep service levels high while |
| Improving Customer Service | | | | remaining profitable. |