Financial services organisations are in a fast-moving security arms race. Keeping pace with the sophisticated criminal actors whose nefarious activities pose a constant threat to the global financial system has become an existential imperative. Which is why we’re integrating automated biometrics and artificial intelligence-powered identity verification into our KURE know your customer (KYC) onboarding and monitoring solution.
Evolving security threat
KYC and anti-money laundering (AML) requirements are getting ever stricter around the world. And criminals’ attempts to circumvent firms’ security procedures ever more refined.
Identity theft, impersonations and account takeovers (in which a fraudster gains control of an account and makes unauthorised transactions) through the use of phishing, deep fakes and the like have become endemic. One look at the filters and visual manipulation that are now commonplace on TikTok shows how widely-available and believable technology-induced creations can be, and the potential threats that poses.
Which makes ID verification so important. Investment managers, banks, brokers et al must ensure that every customer is who they say they are – both when they open an account and at subsequent intervals throughout their lifetime. That verification process must be robust, trustworthy and non-laborious.
Shortcomings will be costly. Process failures, and any resulting frauds, can lead to fines and legal action. Affected customers may be eligible for compensation. And the reputational damage and impact on customer relationships can be debilitating and hard to repair.
Fight technology with technology
The functionality we are rolling out in the initial phase will be targeted at the ongoing verification of financial institutions’ existing customers to ensure their assets and information remain safe. Passports expire. People change their names, address and tax residency. How do you keep on top of that for potentially thousands of customers without incurring enormous cost?
The technology we are employing in KURE automatically extracts data from the person’s ID document (passport, driver’s licence, national identity card, etc.) to determine whether the document is authentic and valid. Facial recognition checks the person holding the ID is the same as the one in the document’s photo. A liveness check then confirms the person holding the ID is physically present and is not a deep fake simulation. The process takes seconds and definitively confirms whether it is the right person or not.
This automated validation provides huge savings and safeguards.
Identity verification traditionally required a ‘wet ink’ certified copy of an official ID document. The customer would have to get a copy of the document physically notarised and send it in by registered post or email.
Valid documents can get lost. Email is unsecure and can be hacked – with both those sending and receiving best served by avoiding email transfers of sensitive information. Documents can be easily faked in any case, while financial institutions are unlikely to check that the notary used is legitimate.
Staff would then need to type the ID information they receive for all those investors into the firm’s internal system. The manual effort involved is hugely time-consuming and prone to error.
Verified advantages all round
ID verification software removes that effort, expense and risk, for the institution and customer.
The end-client no longer faces the hassle of obtaining certified identity proof. And the process ease and speed provide the sort of enhanced digital experience customers have come to expect in other walks of life.
Client self-validation also alleviates financial institutions’ ongoing customer due diligence workload. The technology automatically extracts all the necessary data elements – such as customer name, passport number, nationality, tax residence – and accurately populates firms’ internal systems with that information. No more manual checking and data input. And full end-to-end encryption of the process provides much-needed security.
Next step in the project will be to extend the verification functionality to new customers during the onboarding phase. We will incorporate the technology into our portal solution, enabling prospects to automatically self-verify their identity as part of the account sign-up process.
All told the functionality will make life easier for end-investors. Institutions can streamline processes and alleviate workloads. And stronger compliance controls will make regulators and policymakers happier. Which is what technology should be about.
Security is a battle that financial organisations never win. But we will continue to improve our tools to keep our clients in the fight and their enemies at bay.
ABOUT DEEP POOL
Deep Pool is the #1 investor servicing and compliance solutions supplier, providing cutting-edge software and consulting services to the world’s leading fund administrators and asset managers. Our flexible solution suite, developed by an experienced team of accountants, business analysts and software engineers, supports offshore and onshore hedge funds, partnerships, private equity vehicles, retail funds and regulated financial firms. Deep Pool is a global organisation with offices in Dublin, Ireland, the United States, the Cayman Islands and Slovakia. For more information, visit: www.deep-pool.com.