The problems facing financial institutions are endless. The ability to verify customers in real-time and comply with a myriad of regulations – including know your customer (KYC), anti-money laundering (AML), Federal Financial Institutions Examination Council (FFIEC), and customer identification program (CIP) – is now paramount. Additionally, you must constantly take steps to mitigate reputational, financial, and operational risks.

A Brief History of KYC & AML Regulations

When KYC and AML procedures were put into place with the Patriot Act, regulators purposely did not mandate specific standards that should be used to verify customers. They did this on purpose, fearing that if specific rules were put into place that banks would only ever strive to meet the minimum requirements. This has led financial institutions, out of fear of massive fines, to create individualized procedures and requirements for conducting due diligence.

The documents needed to meet identity verification standards for KYC vary from bank to bank. Some banks require passports, while other ask for utility bills and bank statements. Corporations may need to include all their directors’ information, like names, dates of birth, or legal and tax documentation. Since this varies from bank to bank, this makes the KYC process extremely slow and difficult for individuals looking to receive financial services.

Compliance Costs are on the Rise

While the need for KYC and AML procedures remains strong, they create a burden to financial institutions. It has been reported that the costs associated with maintaining KYC and AML compliance include

  • some financial institutions
    $500 million total global spending
    for some financial institutions
  • financial institutions Drivers Licenses 19% increase in cost associated
    $100 million in total global spending
    for the top 10% of financial institutions
  • cost associated with customer onboarding
    19% increase in cost associated
    with customer onboarding
  • New clients
    Salespeople spend 1 ½ days a week
    onboarding new clients

These statistics have raised concerns about the costs associated with KYC and AML compliance. It has many people wondering if banks are being overburdened to the point that they are unable to perform their other daily functions. Introducing technologies to help automate KYC and AML compliance will help reduce the stress financial institutions are currently facing.

KYC & AML Play a Crucial Role in Customer Risk Rating (CRR)

No industry sector experiences more fraud than the finance industry. The costs are in the trillions – and likely to rise as criminals and thieves find even more sophisticated ways to steal money. With data breaches increasing by as much as 44.7% , identity theft is on the rise as well. In an industry in which both technology and crime evolves daily, you need solutions that always keep you one step ahead of criminals and protect your customers.

In order to prevent criminals from using the tools provided by the financial industry, it’s critical that banks perform customer risk ratings during the onboarding process. Using technology to automate this system provides several benefits.

  • Manual scoring involves a lot of subject bias. Automated processes remove this bias and score based on the information input into the KYC system.
  • Dynamic ratings can be delivered in an automated sytstem through real-time adjustments based on changing circumstances.
  • Risk scores from an automated system can be integrated into a transaction monitoring systems to create more rules and scenarios for risk awareness.

Some believe that customer risk assessment is most beneficial when conducted at the beginning of a custmer relationship. Others argue that it is most beneficial throughout a customer relationship because the risk assessment has actual transaction data attached to it. Regardless, customers should be monitored frequently throughout their relationship with a financial institution.

When does Customer Risk Rating take Place

Financial institutions usually perform three types of customer screening:

  • Onboarding: A risk assessment is performed when a new customer is onboarded. This is typically done by using the screening software to probe the customer with questions. Their answers are analyzed by the system and if cleared the customer is allowed to create an account and perform transactions through the financial institution.
  • Ongoing: This type of screening occurs when a customer changes their account information or the watch list information changes. This screening is systematic and occurs at regular intervals.
  • Real-Time: This type of screening happens when a particular type of transaction occurs, such as a wire transfer. If a wire transfer occurs, then the wire is watch list screened before leaving the financial institution’s internal system. Wire transfers can occur at any time of the day and are a service provided by the financial institution. This means this type of screening must occur on an as needed basis and quickly.
  • Fintech Partnerships are Vital
  • Customer information can be verified digitally using identity verification solutions that rely on data compiled from official data sources such as large credit bureaus and government databases. This type of system will be able to identify customers with a prominent credit history and a limited one as well.
  • There is an opportunity for banks to transform their infrastructure and customer offerings. Fintech providers are focused on creating tools and services that help banks provide better digital services for their customers. Banks must pick up the pace and move faster than they ever have to bring these solutions to market for their banks. This not only would help prevent financial fraud and identity theft, but also decrease the burden they face from outdated internal policies to meet KYC and AML compliance.

What to Consider when Integrating a Customer Verification Solution

These questions should be examined when deciding to purchase or subscribe identity verification solution:

  • What is the desired identity verification method: positive, negative, or logical?
  • Does the solution provide identity verification for individuals and businesses?
  • Does the solution provide identity verification for domestic and foreign customers?
  • How is the verification process performed: in real time or in batch?
  • Can the verification system be integrated with the customer information database?
  • Does the solution verify a user’s identity with the least friction?

One Solution Platform for Endless Problems

IDMERIT provides a comprehensive set of identity verification solutions that could assist in meeting compliance standards for banks and financial institutions. IDMERIT’s products deliver identity verification, Know Your Customer, fraud analytics, credit risk assessment, and due diligence.


IDMkyc is a best-in-class identity verification solution that provides identity verification for individuals and businesses. Using an API (REST), it accesses official data sources across the globe to provide KYC, KYC, and AML compliance.

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IDMscan is an app that delivers consumer identity authentication and verification of government-issued identity documents in real-time. It incorporates facial recognition and face liveness detection technology to authenticate individuals. It determines if an ID being inputted into the system matches the person presenting the ID.

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IDMdevice is a technology that integrates into online browsers and mobile platforms. It examines if the device is being used to access a financial institution portal. By checking the device analytics, IDMdevice determines if any patterns are present that indicate that the user entering the portal is a nefarious character. This is done without any friction to the user and without the use of any personally identifiable information (PII).

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These solutions give you the flexibility and control to rapidly pinpoint suspicious activity. With the solutions available in our comprehensive identity platform, you can effortlessly roll out continuous improvements to counteract the increasing sophistication of financial fraud. We provide you with a safer, faster way to identify legitimate customers so you are able to finish more financial transactions in less time and save money.

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