The Importance of Confidential Identity Verification

Whether logging into a website or answering security questions on the phone, consumers must provide information that can be verified. This includes SSNs, passwords, birthdates, and answers to security questions.


This verification is often required as part of a Know Your Customer (KYC) program and to comply with Anti-Money Laundering regulations. Digital identity verification makes this process faster, more accurate, and easier for both parties.

Identifying the Customer

As the world moves online, identity verification has become a critical tool for businesses that rely on customer interactions and transactions. Using identity verification, companies can ensure that their customers are who they say they are, which helps reduce fraud and compliance risks.

Criminals are increasingly targeting digital platforms like e-commerce, social media, and P2P services to launder money and commit fraud. The resulting data breaches and identity theft can cost businesses millions of dollars. In addition, these crimes are often committed by people who have access to confidential information, including usernames and passwords, dates of birth, answers to security questions, and a range of personal identifiers that can be found in public records.

To combat this, many organizations use identity verification solutions that require a person to provide either active signals or documents to confirm their identity. Signals can include a selfie that is captured through a mobile device, government-issued ID cards, or utility bills. Documents can be verified through a variety of methods, including scanning and analysing the document to check it is legitimate.

These systems help to prevent fraud and comply with AML and KYC regulations. However, it is essential that the systems also avoid false positives and negatives, as both can be costly. False positives can result in the company being liable for fraud, while false negatives could lead to dissatisfied customers who are denied access to a product or service.

Conducting Due Diligence

Conducting due diligence during confidential identity verification is an essential part of complying with know-your-customer (KYC) and anti-money laundering (AML) regulations. It allows businesses to gather additional information and assess the risks associated with high-risk customers or clients, implementing enhanced monitoring measures in line with risk-based approach to prevent financial crimes.

The level of due diligence required depends on the nature and purpose of the business relationship. For example, if a customer is identified as being a political exposed person (PEP), it is likely that increased due diligence will be needed to assess the risk of corruption and bribery. The level of due diligence may also be dictated by regulatory requirements.

For instance, banks and investment-broker dealers must carry out KYC due diligence to ensure that new and existing customers are who they say they are. This involves collecting documents such as government-issued ID cards and passports, and checking against databases. This information is then used to verify the identity of the customer, and establish whether they are a risky target for money laundering or terrorist financing.

Increasingly, businesses are turning to digital identity verification to streamline and automate their KYC and AML processes. This includes the use of identity verification software that combines biometric verification with document and database checks. This approach provides a low-friction customer onboarding experience and reduces the time it takes for businesses to complete their KYC and AML compliance.

Identifying High-Risk Customers

As fraudsters continue to develop new ways to commit identity theft, data breaches continue to occur, and consumers are increasingly concerned about protecting their private information. As a result, businesses need to be able to verify that the people they’re dealing with are who they say they are.

For some industries, such as financial services and those that offer age-restricted products, identifying high-risk customers is critical to avoid impersonation fraud. Using a combination of active signals (such as facial recognition, liveness checks, and device fingerprinting) with passive or third-party signals, such as watchlist screening, fraud reporting, phone risk scores, adverse media reports, and politically exposed persons (PEP) lists can help companies identify suspicious or unusual behavior that requires deeper review.

In the banking sector, identifying high-risk customers is often referred to as enhanced due diligence (EDD). EDD goes beyond standard KYC and involves gathering more detailed information, such as articles of incorporation, partnership agreements, trust deeds for other entities, financial statements, and sources of funds.

For other industries, such as healthcare and telemedicine, identifying the true identity of patients or clients is essential to ensure patient safety and compliance with regulatory requirements. Using biometric and other identity verification technology can confirm the real identities of patients, students, or gamers and provide peace of mind for both parties.

Identifying False Positives

Businesses can mitigate fraud and ensure compliance with AML and KYC laws by using highly efficient and agile identity verification solutions. These digital ID verification methods are a smarter way to verify identities than manual paper-based processes, providing both world-class customer experience and the highest levels of security.

Digital identity verification uses various techniques and technologies to confirm that an individual is who they claim to be. This can involve comparing data such as name, date of birth and address against a selection of trusted comprehensive global identity databases. It can also include liveness detection, where information is matched against official documents such as passports and driver’s licences or cross-verified with publicly available sources to check authenticity.

These checks can be supplemented with other data such as mobile data, social media and geolocation. This can help identify patterns and indicators of fraud, including odd behaviour that may be indicative of a security threat. API integrations can assess these indicators in real-time and trigger a response to protect the business from risk.

In addition, digital identity verification can detect tampering of official documents such as passports and ID cards. Using optical character recognition, AI and authenticity algorithms, these systems can flag a document that has been altered or tampered with and prevent the issue from occurring in the future.