4 ID Verification Challenges Regulated Entities Must Overcome

This infographic discusses the four (4) common challenges when formulating, selecting, relying on and implementing identity (ID) verification processes and workflows that regulated entities often come across within their organisation. 

4 Common ID Verification Challenges

Regulated entities are required to have in place a sound Customer Due Diligence (CDD) program in place that includes the roadmap for them regarding the entire customer lifecycle. Such customer onboarding, Know Your Customer (KYC) and other components of the CDD process are generally contained in the AML/CFT and CPF Policies and the procedural aspect dealing with the implementation of these obligations. Some of the common ID verification challenges include the following: 

1. Implementing KYC Program 

A KYC Program ideally governs the KYC process that the customer onboarding team of the regulated entity is required to follow. It contains the workflows derived from the KYC procedures prescribed by AML regulations of the relevant country. It is one thing to have a plan or roadmap on paper and an entirely different thing to follow through and implement or follow such a roadmap.  

Regulated entities, in their initial years of AML compliance, often face teething problems or starting troubles where they are blinded by unknown obstacles that may come their way when they put the implementation into practice.  

2. Selecting the right IDV Software 

Another hurdle or challenge that regulated entities face is the dilemma of selecting a wide range of KYC and IDV software solutions available in the market. The challenge of selecting the right IDV software is that the regulated entity  might end up getting more functionalities and features than it actually requires, making it a wrong financial decision.  

Contrastingly, if the IDV software selected has fewer features or is non-compatible with prevalent laws and compliance requirements such as data storage or data retention period, then the risk of non-compliance and resultant fines and penalties arises. To avoid this, regulated entities need to come up with an IDV software selection strategy. 

3. Implementing Onboarding Workflow 

Implementation of customer onboarding workflows is another hurdle that regulated entities  face. Some of these challenges are complexities around the scalability and flexibility of existing workflow to include the latest regulatory updates and changes required due to the expansion of business activities. 

4. Finding the Right IDV Solution Provider  

Finding the right IDV Solution Provider is different yet connected to selecting the right IDV Software. Finding the right solution provider deals more with understanding and emphasises the experience and expertise level of the solution provider who has developed a solution. Finding a solution provider who developed IDV software from vast experience and subject matter expertise is difficult as most of the IDV solution providers available in the market are not developed with the aid and inputs of subject matter experts or skilled knowledge partners solving the compliance and regulatory compatibility equation, making the reliability and capability of the IDV software questionable.

Key Takeaways: 4 ID Verification Challenges Regulated Entities Must Overcome

Knowing the 4 ID verification challenges helps regulated entities to come up with action plans to mitigate risks arising from such challenges in a timely manner.