New House Bill makes Online Identity Verification in Banking mandatory
On January 29, 2018, the U.S. House of Representatives passed a bill, HR 1457, the Making Online Banking Initiation Legal and Easy (MOBILE) Act of 2017 that would allow consumers to open bank accounts without having to visit a physical branch. The bipartisan legislation which earned an overwhelming 397-8 vote makes us wonder how something as favorable as removing an inconvenient trip to a physical bank, which might be miles away, was never thought of until 2018.
In the current regulatory landscape, banks face difficulty implementing Know Your Customer (KYC) or Customer Due Diligence (CDD) for online and mobile banking accounts due to inconsistent state laws on scanning and retaining state-issued identification cards. While most states allow mobile banking applications to copy licenses for verifying a customer’s identification, a small number do not and the HR 1457 bill would preempt the conflicting state laws. The bill would allow financial institutions to use electronic copies of identification for purpose of identity verification to enroll the customer in online banking or other sensitive online services. Specifically, the MOBILE Act would allow banks, with a customer’s content, to record personal information from a scan, copy or image of a driver’s license or other personal identification card. The bill would allow financial institutions to electronically scan and retain an individual’s identity verification documents when he/she initiates an online request to open an account or obtain sensitive online services. Furthermore, the financial institutions would be required to delete any copy or scan of an individual’s personal identification documents after use.
Per the legislative description, “the financial institution may use the information for the purpose of verifying the authenticity of the driver’s license or identification card, verifying the identity of the individual, or complying with legal requirements.”
The MOBILE Act of 2017 could help an estimated 67 million unbanked or underbanked people in the United States access mobile banking services. Keeping convenience aside, this would also ensure that consumers are protected by the financial institution’s identity theft and fraud policies. End-to-end digital banking experience to reduce inefficiency, operations cost and time spent has been at the forefront of every financial institution’s digital plans. Although, most financial institutions lack a legal framework that would allow them materialize such lofty plans.
What is the role of IDMERIT?
The HR 1457 Mobile Act of 2017 could prove to be hugely expensive and time-consuming for financial institutions. Moreover, banks might even face huge fine (or the potential loss of their banking license) for failing to meet KYC standards. While it’s difficult to assess the overall financial and reputational losses a financial institution may face, here is a list of what is certain:
- Banks may possess only partial information. (E.g. US military ID, Social Security Card, Employment Authorization Card, etc., all of which come without proof of address)
- Available identity verification documents may be of poor quality. (E.g. poor quality scans)
Compatible with the Foreign Nationals Employment Act, the Compulsory Identification Act, Counter-Terrorism Act, and the Anti-Money Laundering Act is IDMERIT’s Identity Verification Services.
IDMERIT is a global consumer and business verification portal. We help customers across industries and government sectors predict, assess, and manage risks by combining next-generation risk management and anti-fraud services. Our warehouse of unique data and advanced analytics tools to address evolving client needs can help you automate decision making while upholding the highest standards of security and privacy.
We work closely with world-class niche organizations offering data warehousing and validity of contact data solutions to ensure they are compliant with the Foreign Nationals Employment Act, the Compulsory Identification Act, Counter-Terrorism Act, and the Anti-Money Laundering Act. Our company powers the global identity ecosystem for customers.