How to Use Real-time ID Verification to Stay on Top of US AML Regulations

Staying compliant with US AML regulations often comes at the cost of efficiency. But it doesn’t have to be that way. More technologies have been developed in recent years to allow financial institutions to maintain the highest levels of AML compliance without sacrificing convenience. Real-time ID verification is one such technological solution that enables banks to prevent fraudsters and money launderers from infiltrating the system — without burdening agents and customers with manual processes and physical paperwork.

What do the latest AML regulations require of US banks?

Anti-Money Laundering (AML) regulations are requirements put forth by government bodies that ensure banks thoroughly check and monitor their customers for potential connections to money laundering activities. Money launderers use banks to disguise illegitimate money as legitimate funds and pose a financial and reputational risk to financial institutions. AML laws became formalized with the creation of the Financial Action Task Force (FATF) in 1989. This intergovernmental organization was formed to fight against international money laundering and is composed of 37 signatory countries, including the United States. At the beginning of the organization’s creation, it did a broad analysis to identify current money laundering schemes, determine the most common ways of concealing illegally gained money, report on current intergovernmental efforts to combat money laundering, and set goals for combating it better in the future. After the organization passed through this initial phase, it submitted a set of 40 recommendations to assist member countries with the process of identifying and fighting financial fraud. Following the September 11, 2001, terrorist attacks, FATF countries drew their attention to international terrorism financing. The FATF guide was revised and new regulations were born surrounding issues such as weapons of mass destruction, international wire transfers, and other areas that could be connected with the growing threat of terrorism. During this time, the idea of a politically exposed person (PEP) was invented, which refers to a person who is in a position of political authority. PEPs are instantly flagged as a higher risk for financial institutions because of their increased likelihood of being tied to politically-related financial crimes and corruption. The FATF also requires that all member countries work to actively prevent money laundering and take the initiative to snuff out related crime. If funds are found to be tied to illicit activities, the regulatory authorities demand the funds be confiscated and an investigation to be launched. Finally, the FATF asks that financial institutions in member countries comply with KYC and verify the identity of their customers. Customers at high risk of corruption or money laundering should be continuously monitored and if suspicious activity arises, they must be reported. To that end, a financial unit must be maintained that keeps records of such occurrences and handles the investigative process. Part of this includes a responsibility to cooperate with other member countries such as information sharing, report sharing, and assistance in a prosecution that takes place across borders. Today, more than 200 countries and jurisdictions are committed to FATF’s goals and recommendations, which are regularly updated.

How does real-time ID verification help the AML process?

Real-time ID verification is a process that ensures AML compliance without added friction on either the customer or the agent’s side. All customers that sign up for a new bank account will need to have their ID verified as part of the onboarding process. This is to ensure compliance with AML and KYC regulations, which require banks to conduct due diligence on all customers. To that end, when a customer tries to sign up for a new bank account, they are required to show ID. This is government-issued proof of identity, such as a driver’s license, state ID card, or passport. This form of ID is then compared to a public database of official records to ensure the potential customer doesn’t pose a high risk due to country of origin, type of business, or personal or professional connections. If the person does show a high risk, this doesn’t automatically disqualify them from opening an account. After all, banks don’t want to needlessly turn customers away and miss out on opportunities. However, they will keep a closer eye on customers who raise flags early on and report on any suspicious activity such as sudden increases in bank account activity or wire transfer amounts. Real-time ID verification helps banks avoid getting into such situations, to begin with, because it adds another layer of security to the initial ID review process. Instead of just comparing customers’ ID to existing public records, it compares a live photo of the prospective customer to their photo ID. Here’s how the process works in the case of Lightico’s ID verification solution:

1. A call center agent sends the customer a text message containing a link that opens to a secure virtual session.
2. The customer opens that link, which allows them to complete the entire application process including filling out eForms, providing a digital signature, and submitting photo ID.
3. The customer snaps a picture of their photo ID using their smartphone and uploads it to the mobile session.
4. Then, the customer takes a selfie using “live” mode and uploads it to the mobile session.
5. An AI-powered photo ID algorithm scans the two images and determines whether there is a match.

Whereas regular ID verification compares the piece of ID to a public database to determine the status of the customer and whether he is high-risk, real-time ID verification can catch identity theft. In other words, it’s an automated and foolproof way to guarantee that a person really is who they claim to be, and not using forged or stolen ID.

The bottom line

The latest technologies can make it easier for financial institutions to not only flag potentially high-risk customers, but also detect fraud and theft. Real-time ID verification relies on AI algorithms that are faster and more accurate than the human eye alone. This ensures that the process of KYC and AML during account onboarding exceeds regulatory requirements while increasing efficiencies. Learn more about Lightico’s ID real-time ID verification solution at Lightico.com.