Identity Proofing

In an era of increasing digital transactions, it’s critical for financial institutions, government agencies, and enterprises to know that their customers are exactly who they claim to be. Identity proofing stands as a major line of defense against identity fraud and unauthorized access. Without identity proofing, you risk:

• Failing to accurately verify an individuals’ identity.
• Putting sensitive information and assets at risk.
• Compromising trust and safety in online interactions.
• Jeopardizing compliance with federal, state, and local regulations.

So, how can you ensure that your Customer Identification Program (CIP) is working and that you really Know Your Customer (KYC)?

What Is Identity Proofing?

Identity proofing, also referred to as identity assurance, refers to the evidence-based process of confirming an individual’s identity and assessing the risk of transacting with them.

The first part of this process verifies the individual’s identity. This establishes a reasonable assurance that they are who they claim to be. For each verification, there is an acceptable risk threshold determined by internal company risk policies.

Socure’s DocV solution is a best-in-class strategic tool for automating the verification of IDs with advanced decision-making capabilities that enable a nuanced evaluation of risk.

DocV’s identity verification is a powerful solution to the challenge of identity verification. It validates the alignment between the presented identity and the actual person on the other end of a digital interaction.

The identity proofing process is a comprehensive analysis that comprises several elements. These include:

• Fraud detection
• Additional assurance measures (such as DocV)
• Kicking off processes
• Step-up verifications
• “Proof of life” verification
• Phone and email authenticity
• Tracking first and last seen dates
• Deviations from “normal” patterns of identity use

This multifaceted approach ensures robust and reliable verification of digital IDs.

Why is Identity Proofing Important?

The primary objective of identity proofing is to confirm the existence of a genuine identity using publicly available sources and to establish a connection between that individual and the person on the other end of the phone or digital interaction.

Prevent Fraud and Protect Data

In the absence of stringent verification measures, malicious actors can exploit vulnerabilities, assume false identities and engage in fraudulent transactions. This can lead to financial losses for individuals and organizations and erode trust in digital interactions.

Inadequate identity proofing increases the likelihood of unauthorized access to sensitive information, potentially resulting in data breaches with far-reaching consequences for customers, businesses, and financial institutions.

Mitigate Compliance Risks

Beyond the financial security of your customers and your company, adherence to identity proofing measures is imperative for compliance with federal, state, and local regulations.

The law stipulates that companies must employ identity proofing to check applicants against global watchlists and avoid doing business with individuals that may be sanctioned, politically exposed, or who pose additional risks.

Legacy watchlist solutions expose your business to compliance risks. While such traditional approaches may technically check the box, their inaccuracies can result in high operational costs and the threat of regulatory enforcement.

Businesses can face hefty fines and massive reputational damage if they even inadvertently conduct transactions with prohibited individuals. Therefore, it is essential for organizations to deploy rigorous identity proofing procedures that can guarantee compliance with federal regulations.

Effective identity proofing solutions should enable you to effortlessly screen and monitor customers in real time against sanctions, enforcement lists, and your organization’s own custom checks.

How to Implement Effective Identity Proofing

User-friendly identity proofing is vital for meeting the expectations of your clientele. Best-in-class solutions must strike a balance between creating friction for bad actors and providing a positive experience for genuine customers.

Inaccurate identity proofing can lead to banks rejecting good customers and suffering reputational damage.

Successful identity proofing requires both high-quality data and the ability to use this data for entity resolution. This means that it needs to rapidly determine whether multiple digital records are referencing the same real-world identity. It must also successfully handle potential challenges such as false positives or negatives, the need for manual review, biases, and the risk of violating compliance regulations.

There are many steps and factors to consider when implementing robust identity proofing measures. Businesses need an end-to-end fraud solution that conducts risk-based verification at every step of the customer journey.

Your chosen solution must be able to fulfill each of these requirements:

• Provide risk controls to apply additional measures to high-risk transactions or even seemingly low-risk transactions such as account changes which may indicate attempted account takeovers (ATO).
• Include a selection of suitable tools and technologies; for example, Socure provides both a comprehensive fraud and compliance suite, as well as a powerful DocV tool.
• Comply with legal and regulatory requirements, including checking against Global Watchlists.
• Allow you to identify fraud and compliance risks within your existing customer accounts.
• Provide instant verification for consumer-provided name, SSN, and DOB matches with the issuing authority to enhance compliance and promote financial inclusion.

Socure Verify is an industry-leading identity proofing solution that automates the customer onboarding process. With unrivaled data coverage and cutting-edge technology it delivers an exceptional customer experience on top of uncompromised compliance.

Legacy identity verification and CIP KYC solutions incorrectly return matches ~5% of the time. These solutions are also unable to verify certain population sectors over 10% of the time. This leads to bias across different ages, races, and socioeconomic classes. Unlike these solutions, Socure provides accurate and inclusive identity verification.

Types of Identity Proofing

There are several different types of identity proofing, each with their own benefits and limitations.

1. Knowledge-Based Authentication (KBA) is a form of verification designed to establish the genuine identity of an individual according to the information they provide.

KBA prompts the user to input information given during a signup process. This can be factual information or based on preferences; i.e. “Where did you attend high school?” or “What is your favorite color?”

KBA can frustrate customers who may have forgotten certain information. However, the bigger threat with using KBA is the risk posed by bad actors. The process can be circumvented using compromised personally identifiable information (PII) gained through social engineering or scraped from social media. It is an outdated approach that doesn’t protect against synthetic identity fraud.

2. Biometric verification is used to confirm a claimed identity by evaluating distinguishing biological traits, such as fingerprints or facial features.

It allows a person to prove his or her identity by supplying a biometric sample that is matched to an associated, verified identifier or identifiers to gain access to financial services ecosystems or other secure environments.

While user-friendly and effective for trusted vendors, there is a perception of invasiveness and many users do not trust such systems or want to submit their data. There is also a concern about bias with many biometric solutions.

3. Document verification is the process of verifying the authenticity of a document, such as a driver’s license, bank statement, or government-issued identification document using a technology like Socure DocV.

This is a higher-friction method, but it provides an added layer of assurance. It works best if the provider can identify fraudulent documents effectively and quickly without the need for manual review.

Depending on the vendor, there may be issues with high false acceptance or rejection rates that require extra steps. The customer also needs an existing ID on hand for the process, and active liveness detection can cause accessibility concerns.

Another solution is Socure Verify, a non-documentary identity verification system that is “passive” and uses public record data as opposed to using identity verification documents. This solution is lower-friction than document verification and doesn’t require much input from the customer except for information. The system matches supplied information against data sources and confirms it passively.