Biometrics are Necessary for Robust Identification Services

There has been a steady growth of biometrics for personal identification. Authorities consider it more important than ever. They aim to bring more security to consumers and various organizations, particularly banks.

The Problems Biometric Technologies are Addressing

Anti-money laundering (AML) and Know Your Customer (KYC) remain significant global challenges for banks and financial institutions. At the same time, biometric technology is becoming more affordable, innovative and reliable. These advances are leading financial institutions to change the way they combat money laundering.

According to United Nations Office on Drugs and Crime (UNODC), the estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion – $2 trillion in US dollars. This money helps fund criminal actions, drug trafficking, and terrorist activities. Today, most banks must follow AML and KYC regulations or face large fines.

KYC and AML regulations include many steps and processes to follow. The most important step is to have a procedure in place that quickly and efficiently verifies customers. Banks must find a way to apply these expensive, time-consuming and difficult to implement procedures.

The problem is that these procedures and systems are often expensive, time-consuming and difficult to implement.

Regulations are Here to Stay

Now is the time for financial institutions to do their due diligence. They need to research and implement comprehensive identity verification solutions. Regulators will not waste time to rapidly put these requirements in place.

Recently, European banks ING and Danske were both separately accused of money laundering failures. Because of these incidents, European regulators circulated a confidential “reflection paper.” The paper warned about the shortcomings of EU AML efforts.

European regulators recommend centralizing AML enforcement through a new EU authority. This authority would require banks to implement background checks for KYC and AML requirements. The paper also sets a deadline for the European Central Bank (ECB) to build connections with national authorities. The goal is for the ECB and national authorities to share sensitive data with one another for identity verification.

In another example, it is estimated that AML costs have risen more than 50% in the last three years. Between 2014 and 2017, HSBC tripled its compliance staff to 8600 employees. It also spent $3 billion on compliance in 2017.

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Why we Need Biometric Technology

Some developing countries have a hard time developing financial services. This should not be happening. It is bad business.

There are roughly 2 billion adults globally who do not bank with a financial institution. The main reason for this is they lack the necessary documents to gain access to an account. Biometric technology can help ease these issues by providing a unique way to prove someone’s identity.

They can help build efficient and effective AML compliance strategies for these types of customers. This removes literacy, geographic and financial barriers when a person wants to open a bank account. Overall, this will create a more inclusive financial system.

When to Use Biometrics

Biometric technology can be implemented during new customer registration. They can be incorporated into a customer due diligence strategy and provide identity verification for a robust KYC process. When it comes to criminals, sometimes they use multiple passports to avoid detection. Biometric identification offers a way to block these characters from laundering money.

In the digital age, we are moving toward customer not present transaction scenarios. Because of this trend, biometrics are extremely useful. Biometrics build a strong link between an anonymous digital identity and a real person.

Examples of Biometric Use

Many countries are incorporating biometric technologies like fingerprint scanning, liveness detection and iris scanning to verify customer identities. Some countries have gone as far as implementing country-wide biometric national ID programs. Financial institutions in these countries can use the systems for KYC.

In India, a customer can present his or her Aadhaar number at any financial institution that uses biometric technology. First, the customer consents to a KYC check. Then his or her biometric information is captured. It is then matched against information stored in the UIDAI server, a national database. If the information matches, a bank can instantly open a bank account for the customer in question.

This is an e-KYC process and it is being applied throughout the country.

Conclusion

The Financial Action Task Force emphasizes the importance of securing the financial system. Biometric technology can address this concern and create identity verification systems without the need for identity documents. They can also improve customer experience through robust and quick KYC procedures.

Financial institutions that implement these technologies will likely stand out against their competitors. They will not only be preventing financial crime, but they will also be creating a more inclusive global financial system.

Alex McGinness

Alex is passionate about making the world a better place. She believes she can change the world, and one way she can do that is by helping businesses grow online through digital marketing. She excels at branding, graphic design, web design, social media management, and content writing. Alex finds the most success when she is working with companies that produce services or products that make the world a better place. She enjoys working with a collaborative team that is organized, goal-oriented and harmoniums. At IDMERIT, she manages their digital presence online as their in-house marketing coordinator. Her goal is to showcase the IDMERIT brand as a leader in global identity verification services.

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