Why Identity Verification in Financial Services Is Critical
Do you know who your customers are? This sounds like a trick question, but it isn’t. Although organizations are required to have Know Your Customer (KYC) and Anti-Money Laundering (AML) checks baked into their interactions with customers, the degree of certainty around a customer’s identity isn’t always as high as it should be. Identity theft is a pervasive problem, and it leads to many challenges for banks, lenders, insurance carriers, and other financial institutions. Reported instances of fraudsters using stolen identity information to open new bank accounts under a victim's name grew by 32% in 2022 in the U.S. according to the FTC to over 110,000 cases – in each of these situations, the bank’s KYC/AML process failed. Meanwhile, in the UK, instances of credit card ID theft, where a criminal either opens a new card using a stolen identity or takes over a genuine account in good standing, were up 101% YoY midway through 2022 according to UK Finance, with a reported gross loss of £21.4m in the first half of 2022.
These financial crimes are costly to consumers and financial institutions alike. For financial services organizations, a failure to verify their customers’ identity in situations such as these carries a reputational cost, too – so it’s important to get it right.