ID Verification, Money Laundering and Regulatory Compliance
The last decade brought about a tumultuous change in financial institution regulations. Many...
Rounding out our October spotlight on identity fraud and identity authentication, we have recently published a comprehensive white paper report presenting a 360-degree perspective of the issue, and the most cost-effective solutions. Below are some highlights from from the paper. You can download the entire report free at http://www.fraudfighter.com/
A Plethora of ID Types
In addition to the sophistication of today’s counterfeit documents is the sheer number and variety of valid identity documents in circulation. Not only are there approximately 600 different styles of valid U.S. driver’s licenses, more than 500 different “specialty” driver license style (e.g. “off-road”, “motorcycle”, "commercial vehicle”, etc.), but there are also a multitude of passports, visas, state I.D. cards, military I.D. cards, work-permit and resident alien cards, diplomat ID cards and a variety of different travel identity documents. Multiply that by the number of nations issuing passports, visas, immigration papers, and other identity documents and the problem becomes glaringly apparent. No single individual can be expected to be familiar with all the various jurisdictions, document types, and issuance series of all the identity documents issued worldwide. And even if it was possible, the time it would take to do so manually would result in long lines and wait times, frustrated and angry customers, and harried document examiners.
The Key Features of an Effective Solution
The key to implementing an effective Trusted Identity solution is 1) a comprehensive understanding of all facets of the Document Authentication process and 2) the ability to seamlessly integrate the solution into existing business processes using best practices implementation. In addition, because of the constantly changing landscape that is identity documentation, the solution must also offer an extensive, inclusive document library that is updated on a regular and frequent basis. By meeting these needs, complete Document Authentication solutions allow financial institutions to quickly, efficiently, and reliably authenticate the thousands of different identity documents issued in today’s environments, and in so doing, to have a high degree of confidence that the applicant is presenting a genuine identity.
Comparing the Costs of Subscription-based Services vs. Fraud Fighter's B5000
Online verification solutions are a recurring expense. The subscription model may include monthly fees, per-seat license fees and transaction costs ranging from a low as pennies-on-the-dollar to more than $3.00 per transaction depending upon the level of detail, the volume of searches conducted, the service provider, and the nature of the search.
Considered in entirety, the total cost of ownership (TCO) of the Document Authentication solution, which is a hardware/software purchase enabling unlimited Document Authentications, will over time prove to be considerably lower than the perpetual per-transaction fees associated with online verification services. A recent TCO analysis by a financial institution showed that the costs of the Document Authentication solution was significantly less than the long-term cost of conducting online verifications. Additionally, costs associated with online verification aren’t typically addressed until after the purchase decision, such as branch set-up costs that may require structured financing, or the operational costs of manual entry of ID data into branch systems that could otherwise be automated with Document Authentication.
At 25 verifications per month, the cost of ownership for the B5000 is higher than paying a per-transaction fee for online verification. However, our survey of several businesses has uncovered some significant facts about the costs associated with using online verification services, and reasons why the online services are less desirable.
• Original Setup Cost for Online Verification
o One survey customer told us there was a $3,000 fee to set-up a 5-branch operation. This $600 per-branch cost to initiate the online service would affect the analysis conducted in the above chart unfavorably for online verification.
• High Failure Rate
o One small bank based in Florida experienced 50% failure rates in some case when utilizing an online service. This is defined as the inability to verify an identity due to either incorrect data, or the inability to access the data from the jurisdiction where the ID was issued.
• Due to their geographic location, they may have had a higher-than average number of problem-state driver licenses, but the fact is that failure rates will be high with online verification systems.
o Higher failure rates increase CIP exceptions
o CIP exceptions require formal report preparation – both internal and external (e.g. Suspicious Activity Reports)
• Online verification requires the business to print-out each inquiry.
• Requires making a copy of government issued ID
o Online verification does not aid in the secure/encrypted storage of private customer information. Actions and procedures for adherence with FTC Privacy Laws create additional work and expense.
• Requires scanning ID verification & ID to a network drive
o After the online verification is performed, organizational procedures may require that the ID document and the verification report be manually scanned into digital format.
• Unable to view ID
o B5000 provides clear, high-resolution enlarged images of ID document and identifying pictures for comparison to the individual in the branch.
• Manual entry of ID fields to CRM/Branch IT System
o B5000 ability to export XML data from the license is a labor-saving feature that online verification cannot offer.
The Bottom Line is the Bottom Line
Ultimately, the real and quantifiable value of Document Authentication is the tens of millions of dollars it saves organizations by virtually eliminating losses related to processing accounts associated with fraudulent identities. Applicants attempting to open accounts or obtain credit with fraudulent ID documents are unsuccessful in their attempt, and are either reported to law enforcement or will seek alternate financial institutions that do not perform identity authentication. Often times, this removal of the threat is enough to make the case for investing in the technology because the amount each institution loses each year related to identity theft is tracked as a performance metric.
If you have followed the news at all lately, you have likely heard that financial institutions of...