Digital Identity Verification Requirements for Financial Services

Financial institutions (FIs) operate in a business environment with rigorous regulations and compliance requirements intended to protect themselves and their customers against the threat of identity fraud and other financial crimes. That said, the recent push for remote and digital banking services has ushered in an entirely new wave of cyber security and identity fraud concerns for consumers and FI’s alike.

Digital identity verification is one of the most important safeguards for any institution, especially those in the financial services industry, along with related regulations such as KYC, AML, and CIP. With the introduction of AI/ML powered identity verification solutions, verifying identities online can be quick, highly accurate, and smoother than ever before.

So, what are these requirements and what do they mean to you—the consumer? Below is a list of key regulations related to safeguarding identities and the common acronyms used when talking about onboarding customers and the importance of digital identity verification in the financial services industry.

Know Your Customer (KYC)

KYC Compliance or know your customer, is a required customer identification program (CIP) in which U.S. financial institutions must verify the identity of individuals wishing to conduct financial transactions with them. Know your customer is often interchangeable with CIP; learn more in our CIP vs KYC blog post.

KYC helps financial institutions (and other businesses) answer the question, “Is this person real?” As a consumer, KYC is an essential step in the onboarding process that verifies your identity and helps protect you against identity theft, synthetic identity fraud, and more.

Customer Identification Program (CIP)

A provision of the Patriot Act requires U.S. financial institutions to verify the identity of individuals wishing to conduct financial transactions with them through the use of a customer identification program (CIP) or identity verification service. CIP is often interchangeable with KYC (know your customer) and also helps financial institutions answer the question “Is this person real?”

CIP ensures that the financial service provider is verifying the identity of an applicant/consumer before engaging in business with them.

Anti-Money Laundering (AML)

Anti-money laundering or AML refers to the requirement that financial institutions and other regulated entities must comply with to detect, prevent, and report money laundering activities.

AML is much broader than KYC, and there are several different laws to regulate AML practices globally to ensure that banking customers do not use financial institutions to partake in money-laundering activities. For the consumer, this is another identity verification check to keep you (and the institution) safe from illegal activities.

Socure’s leading AI/ML identity verification and fraud risk solutions powers identity verification systems for more than 1,800+ customers including four of the top five banks, eight of the top 10 card issuers, and over 100 of the largest fintech companies. To learn more about how Socure can change the way you do business, talk with one of our experts today.