How to Ensure your Customer Due Diligence Processes are Client FriendlyJanuary 28, 2020
Countering Terrorist Financing (CTF) – Fighting Terrorism through AML ControlsFebruary 26, 2020
The link between Due Diligence and Identity Verification
As a regulated entity, the verification of your clients is imperative in order to safeguard your business from becoming complicit with criminal activity such as money laundering or terrorist financing.
The introduction of the Money Laundering and Terrorist Financing (Amendments) Regulations 2019 (UK transposition of the EU’s 5th Directive) further reiterates the vital criteria of screening in relation to your due diligence procedures.
Before engaging in any business relationship with an individual or providing your services or products you must:
- Confidently verify the individual’s identity (including their current address)
- Ensure they have no financial sanctions nor are recorded on the watchlist
- Have knowledge of whether they are a PEP
*when relevant you may have to identify the ultimate beneficial owner
In practice, this means you need to:
- Verify the name of an individual
- Verify the date of birth of an individual
- Verify the identity of the individual via official ID documentation and sources
- Verify the residential address of an individual
- Establish if they are recorded on the global PEP and Sanctions lists
* for identifying an ultimate beneficial owner, you need to confidently establish the ownership structure of a company, partnership or trust. Once identified, you generally would carry out the same customer due diligence as prescribed above.
The due diligence process only ceases when you are confident that the individual poses no risk of money laundering. If adverse information is found, then even further investigation is required.
Moreover, it is also important to remember that identity verification is only one part of your CDD obligations.
Are you confident you can spot a forged document?
The above processes can become bothersome and time consuming if carried out manually. Valuable time and resources can be wasted trying to cobber together the necessary documentation to validate an individual’s identity.
Moreover, relying on the naked eye to verify ID documentation, such as passports where forgery is common, is a risky strategy that can leave your business exposed to the wrath of crafty criminals.
As a sweeping generalisation, the purpose of CDD is simple in that you wish to confidently verify that an individual:
- is who they say they are
- lives where they say they live
- poses no risk of money laundering
However, whilst these questions are simplistic their answers can become complicated in a world where over hundreds of billions of pounds are laundered each year.
Electronic verification tools can enable businesses to answer these key due diligence questions more swiftly & effectively. Businesses risk of money laundering exploitation and complicity dramatically decreases when the verification process encompasses checking client information against officially recognised databases.
You need to gain an appropriate level of assurance that the claimed identity is in fact the person with that identity.
Electronic Verification Edition
1“What are the key benefits of electronic verification for my business?”
- Security Confidently safeguard your business by truly confirming the identity of your clients via numerous data sources.
- Reliability Screen every client quickly via the same reliable and reputable data sources. These include the registers maintained by the Electoral Commission, credit reference agencies e.c.t
- Optimized Onboarding With standardized measures to follow and outsourced electronic assistance, client onboarding will inevitably become faster, more organized & efficient.
- Improved Customer Experience A fast onboarding experience that still feels secure satisfies the digital savvy consumer of 2020. Moreover, a swift onboarding experience frees up resources to be focused on improving the customer experience – giving your firm a competitive advantage.
2“What is the problem with paper-based identification procedures?”
- Less Secure Paper-based procedures and manual checking can be exploited by high quality fake identity documentation.
- Less comprehensive Relying on traditional, manual checking procedures puts your firm at considerable risk of not really knowing who you are dealing with.
- Resource wastage Not only is it a waste of paper, it is a drain on staff time and is much less cost-effective long term.
3"When choosing a electronic identification provider, what should I consider?"
- Is the firm recognised, through registration with the ICO, to store personal data?
- Is it accredited, or certified, to offer an identity verification service through a governmental, industry or trade association process that involves meeting minimum published standards?
- Does it use a range of positive information sources, including other activity history where appropriate, that can be called upon to link an individual to both current and previous circumstances?
- Can it access negative information sources, such as databases relating to identity fraud and deceased persons?
- Can it access a wide range of alert data sources?
- Are its records up-to-date?
- Can the service allow you to demonstrate that you have verified clients by showing what checks were carried out, what the results of the checks were, and what they mean in terms of how much certainity they give as to the identity of your clients?
*Guidance taken from JMLSG, Current Guidance, Part 1, Chapter 5, paragraph 5.3.52.
4“How is Veriphy helping firms with their due diligence and AML requirements?”
We offer professional firms with the foundations to implement a successful anti-money laundering program via our The Three Pillars of Compliance Initiative.
To learn more about our Pillars of Compliance Scheme, please click here.
Veriphy offers a wide range of electronic verification products. Contact us to find out more about our current identity compliance solutions and register your interest for our real-time identity verification app!
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