What is Identity Verification and how does it work?

If you’re wondering ‘what is ID verification’, then you’ve come to the right place, as this blog delves into everything you need to know about the process that is essential to fulfilling your AML obligations. Proving that a customer is who they say they are, however, can be surprisingly difficult, coming with a set of unique challenges. 

Identity verification checks can be quickly and efficiently carried out using our SmartSearch platform, streamlining your operations with an effortless solution. Verifying the identity of each customer against several different pieces of key data, our robust system can take on your entire Customer Due Diligence process with ease.  

So, what is ID verification?

ID verification is, put simply, the process of verifying that a customer is exactly who they claim to be. This is performed by creating a data profile of evidence to prove their identity and is commonly used in financial institutions before onboarding as a customer and allowing them to use your services. Failing to perform an identity verification check can leave your business at risk of fines, sanctions, reputational damage and much more.

An initial and essential step of the Know Your Customer (KYC) and CDD process, the ID verification stage collects basic information from a customer, including their name, address and valid form of ID, such as a passport or driving license. Some ID verification platforms, like our own, also use biometrics, such as facial recognition, to add a further layer of verification.  

Identity Authentication

Although identity authentication sounds essentially the same as identity verification, they shouldn’t be bundled together since they are distinctly different from each other. Put simply, while verification concerns proving a customer is who they say they are, authentication is a process that ensures that a returning user holds the identity that was previously verified. 

Authentication can be carried out in a number of different ways depending on the sensitivity or the importance of the withheld data. For example, to access a social media account, you will be asked for a username and password, whereas a bank account might require a unique customer number and pin, plus a personalised security question. 

Sensitive information is increasingly being kept behind biometric authentication systems, such as facial recognition and fingerprint scanning.

Digital identity verification vs manual methods

Cutting-edge technology requires contemporary solutions, which is what makes digital identity verification so much more reliable and efficient than traditional manual processing. Saving businesses and customers valuable time by cross-referencing information across various global data sources and public databases, electronic ID verification is an efficient, modern solution. 

The digital identity and attribute trust framework awards businesses that provide strong, authentic digital verification platforms, with SmartSearch being one such service. Claiming the certification in 2024, and being recognised as a trusted Identity Service Provider (IDSP) demonstrates the innovation of our platform and our commitment to helping customers safeguard their businesses from security risks.

How does identity verification work?

The process of identity verification works by collecting and verifying personal data from customers across the globe. Regularly carried out during a customer onboarding process, the data provided will be cross-referenced against a verified set of results, such as official government documents to ensure that the customer is who they say they are. 

Performing digital identity verification, using data verification and AI-powered facial recognition helps to onboard a customer as quickly and as efficiently as possible, removing the need for manual processing. Using public databases, electronic ID verification, like our eKYC solution, can be easily performed without interrupting the flow of your business practices. 

The methods of identity verification 

Different methods of identity verification can be perfectly tailored to exactly how your business wishes to carry out its processes, with some techniques being more appropriate for certain tasks than others. In an ever-more complex digital world, certain methods, such as biometric verification are favoured to combat sophisticated cybercriminal tactics. If you’re wondering how to prove the identity of a customer, consider the following methods: 

Biometric verification

This solution uses biometric verification methods such as facial recognition, retina scan or fingerprint validation to ensure the customer is who they claim to be. Though time-consuming to gain all the necessary information, biometric verification is considered to be one of the most secure. 

Credit bureau-based authentication

Used by financial institutions and other relevant businesses to verify the identity of an individual carrying out a significant transaction or opening up a bank account. In this method, the provided information is cross-referenced with data available from credit bureaus, including credit history, loans and more. 

Database methods

When using this method, data is accessed and analysed from several different sources in order to confirm identity. Relying on pre-existing documents that are public information, the database ID verification method checks an individual’s identity against government records and other relevant databases. 

Document-based verification

Industries that require strict KYC conformity will often use document-based verification when sifting through customers. This method verifies customers through physical documents such as passports and driver’s licenses, with these documents being reliable, government-issued forms of identification. 

Knowledge-based authentication

Perhaps the simplest method of identity verification, knowledge-based authentication asks customers to enter usernames, PINs or passwords when requesting access. Common but not comprehensive in its security, this method can be easily used by criminals who impersonate customers with stolen user data.  

Two-factor authentication

Using two-factor authentication is one of the best ways you can protect your business from fraudulent activity. This method requires a customer to go through two stages of verification before they are given access, with the first often involving the Knowledge-based authentication of a password, and the second requiring an SMS verification code, or a similar technique. 

Five benefits of digital identity verification 

While identity verification should be a key stage in your essential KYC obligations, this process also brings key benefits to the operation of your own business.  Keeping you compliant with the regulations outlined in the 6AMLD, the process of identity verification will optimise business operations and even improve the experience of your customers.

1. Improve your KYC and CDD process: Bolster the integrity of your KYC and CDD process with a robust digital identity verification procedure at the onboarding stage. 

2. Reduced fraud risk: Help to prevent yourself from fraud by comprehensively screening onboarding customers for potential risks. 

3. Enhance your company security: By carrying out proper digital identity verification you can decide who to onboard and who to leave out, protecting the business from possible data breaches and other security risks.

4. Experience a more efficient onboarding process: Manual identity verification is laborious for both the employer and the customer. Using digital checks streamlines the process, even for international individuals, and makes documents easier to cross-reference again in the future.  

5. Reduce costs: Manual checks cost time and money. Performing digital verification checks reduces operational costs and removes the possibility of human error that could prove costly in the long run.

The importance of identity verification

Preventing fraud and ensuring the security of both your business and that of the national economy are just two reasons why identity verification is crucial for companies to perform. In an ever-changing world where combatting financial crime is becoming increasingly more complex, the need for robust identity verification procedures is paramount.

• Identity verification and robust KYC checks are integral barriers against financial crime. 

• AML compliance is required by law and protects the financial system when properly performed. 

• Identity verification enhances customer trust, demonstrating that you’re performing your due diligence to prevent fraud.

• The safeguarding of personal data is highly important for all companies - utilising a robust identity verification system helps to protect this. 

• Protect national security and the integrity of the economy.  

Optimise your identity verification with SmartSearch

At SmartSearch we pride ourselves on having everything you could need to carry out comprehensive AML checks on one singular platform. From ID verification to KYC and CDD checks to our complete TripleCheck solution that allows you to carry out a three-tiered verification system to ensure beyond any doubt that your customers are exactly who they claim to be. 

For total peace of mind, our AML solutions also include a source of funds checker and SmartDoc, a form of identification document validation that allows you to authenticate and onboard customers from across the globe. To discover how our platform could optimise your business, contact us now or reach out for a free demo to experience the power of SmartSearch for yourself.  

FAQ

What is ID verification?

Simply put, ID verification is the process that businesses of all sizes should go through to ensure that a customer is exactly who they claim to be. This is often done by cross-referencing personal details against official pieces of government documentation. It is essential that businesses comply with the requirements of ID verification and KYC checks in order to avoid government penalties. 

Is identity authentication the same as identity verification?

Part of the same process as ID verification, identity authentication is a little different, making sure that a returning customer to a particular service remains who they claim to be when initially verified. Identity authentication measures can include two-factor authentication as well as the submission of biometric proof.