KYC – Untying the gordian knot of identity verification

There is a common thread between academy-award winner, Leonardo Dicaprio and the indispensability of know-your-customer (KYC). For most of you Dicaprio fans out there, you would have guessed it by now, that connection is the blockbuster ‘Catch me if you can(2002)’^[1]. Dicaprio portrays a master con artist, who some consider as the best of all-time, Frank Abegnale. The protagonist Abegnale’s credit card frauds are amongst the most successful heists^[2] of all time, amounting to thousands of dollars. KYC, if not done properly, could amount to such drastic consequences

Definition of KYC

Let’s not jump the gun here, first we should discuss what actually is KYC. Trullio ^[3] defines KYC as an activity with a three-pronged objective: establishing customer identity, ascertaining the sources of funds, and assessing money laundering risks. At a broad-level, Barclays ^[4] defines KYC as a process of identity verification of the customer, with an objective of preventing money laundering activities by potential customers. With the definition of KYC being dealt with, let’s discuss the various documents which can be used for KYC

KYC Documents

Each and every country ^[5] has their own set of regulations when it comes to enacting the KYC principles. A centralised regulatory body, such as RBI for India or Banca d’Italia for Italy or statutory measures such as USA Patriot Act may lay down the guidelines. Even various task forces such as the Financial Action Task Force(FATF) may designate the specifications to be followed from KYC AML perspective. These guidelines then act as the benchmarks for various financial institutions to adhere to. Documents required ^[6] for KYC fall under two categories: Mandatory and Optional. Even though documents vary country-wise, they can be generalised at a broad level to make them geography agnostic. Applicability of KYC documents is at two levels: individuals and legal entities.

For individuals, it encompasses a government-issued document ^[7] with a photograph (such as a valid passport or a valid photocard driving licence or a social security number or employer identification number), supporting documents of home address, occupation, revenues which enable the client’s resources to assess creditworthiness. For legal entities, it encompasses original or certified copy of any deed or extract of an official register stating the company name, address, legal status and identity of the executives, annual reports of the last few years and auditors’ reports

Once the documents are in place, actual KYC verification kicks in. Whether or not the documents entitle a customer for availing a particular service (savings account or loan) entirely depends upon the creditworthiness assessment of the individuals. Before the assessment on solvency can be carried out, identity verification can only be skipped at one’s own peril. And this is what we are going to deal with in the next section of ‘identity verification’ in the world of digital ky

Identity verification in the world of digital kyc : A case study

Going digital is a mantra which is echoing across the entire globe. We at IDcentral, have helped countries from South Asia, SouthEast Asia and Africa amongst others to embrace this digital journey with us. With the current Covid crisis displaying no intentions to slow down, focus has intensified towards paperless and video KYC. Such a drastic shift could never have happened without the underlying strong foundations laid by the government institutions such as cloud deployment, API first development and tech stack changes. IDcentral has been able to catch the crest of this wave by having partnerships with multiple partners across various geographies to target three critical areas pertaining to a customer identifier: coverage, richness and accuracy. For one of the successful pilots for driver’s license verification, we were able to successfully identify false positives and false negatives, based on the API pulls from the trusted and verified sources.

In order to thwart the attempts of fake registrations based on DL, we also did a near real-time photo validation or face check. Baseline photo was the selfie and the golden source/reference was the one pulled as a API response from the trusted government repository. Using our face match score, we were able to identify fraudsters using a different photo for the same DL number. IDcentral’s proprietary analytics layer brings immense value to the customer by uncovering such hidden patterns in their data trove.

We are here to help

We at IDcentral are of firm opinion that digital trust is the next big thing on the technology horizon. We have helped multiple companies in not just getting them started on this journey but have also helped them in crossing the chasm from being a challenger to a visionary. We bring with us two plus decades of experience in fraud analytics to specifically cater to the scenarios covering credit score, kyc, data enrichment, digital identity and identity fraud among others

References

[1] https://en.wikipedia.org/wiki/Catch_Me_If_You_Can
[2] https://www.biography.com/personality/frank-abagnale
[3] https://www.trulioo.com/blog/kyc/
[4] https://www.barclays.in/content/dam/barclays-in/documents/download-forms/kyc/Importance_of_KYC.pdf
[5] https://en.wikipedia.org/wiki/Know_your_customer#Laws_by_country
[6] https://www.rbi.org.in/commonman/English/scripts/notification.aspx?id=2607#:~:text=%E2%80%9COfficially%20Valid%20Document%E2%80%9D%20(OVD,by%20the%20National%20Population%20Register
[7] https://www.pwc.co.uk/assets/pdf/kyc-qrg-final-interactive.pdf

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Abhishek Srivastava

Abhishek Srivastava is a seasoned product manager with experience across supply chain, retail and machine learning based products. He holds an MBA from DoMS IIT Madras and loves to immerse himself in non-fiction reading.