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Identity proofing crucial in preventing financial crimes


By Siddharth Gandhi is the COO Asia Pacific at 1Kosmos

Identity proofing is verifying an individual’s identity through various means, such as detecting fraudulent or duplicate identities and establishing or reestablishing credential verification. This process is often used in the financial industry to prevent financial crimes, such as money laundering, fraud, and identity theft.

To properly implement an identity proofing process, the current identity construct of a username and password needs to be replaced with a verified identity. These verified identities ensure that users are who they say they are by matching biometrics along with government-certified credentials to verify the identity holder. The process of verification is based on certain global standards like NIST. The biometrics of the verified identity can then secure authentication into the user’s account.

Online identity verification can bring additional security and trustworthiness to an enterprise authentication system. However, that kind of verification shouldn’t get in the way of the user experience. Modern authentication and identity verification systems combine tools like integrated biometrics, liveness testing, and streamlined user experience.

The use of identity proofing has become increasingly important in recent years as financial crimes have become more sophisticated and challenging to detect. Traditional methods of preventing financial crimes, such as relying on human judgment or simple rule-based systems, are no longer sufficient to combat criminals’ complex and evolving tactics. Today, there is no way to ascertain the real identity of the person on the other side who is logging in. As a result, many financial institutions have turned to identity proofing to protect their customers and assets better.

There are several ways in which identity proofing can help prevent financial crimes. One of the main benefits is that it allows financial institutions to verify the identity of their customers before they open accounts or conduct transactions. This can help prevent identity theft, as it ensures that only the rightful owner of the identity can use it to access financial accounts or conduct transactions. Additionally, identity proofing can help detect and prevent money laundering, allowing financial institutions to identify and track the source of funds.

However, there are also limitations to the effectiveness of identity proofing to prevent financial crimes. One of the main challenges is that identity proofing relies on the accuracy and completeness of the data used to verify an individual’s identity. If the information can be validated through third-party sources, one can establish a higher level of identity assurance institution to verify their identity accurately. Additionally, identity proofing may not be able to detect financial crimes conducted using legitimate identities, such as those obtained through identity theft or other means.

Despite these limitations, identity proofing is still widely considered a key tool in the fight against financial crimes. By verifying the identity of individuals and tracking the source of funds, financial institutions can reduce their risk of being used as a conduit for illegal activities. However, financial institutions must implement robust and effective identity-proofing processes to prevent financial crimes. This may involve using advanced technology, such as identity-based authentication, and integrating multiple data sources to verify identities.

Identity proofing is vital in preventing financial crimes but is not a panacea. Financial institutions must take a holistic approach to prevent financial crimes, including identity proofing, strong internal controls, regular employee training and partnerships with law enforcement and regulatory agencies. By taking these steps, financial institutions can help protect their customers and their assets from the threat of financial crimes.



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