Strategies to Implement and Enhance Digital Onboarding
September 18, 2020
The COVID-19 pandemic has hampered the onboarding process for financial institutions. Where previously customer due diligence and verification was supported by in person reviews, that was no longer possible during the closure of branches.
Adding to the stresses was the need for FIs to process billions of dollars in stimulus payments to small businesses yet still ensure that funds were not lost to illegitimate or shell companies.
Digital banking is not new but its importance has been accelerated. This fact is especially true for the onboarding process. But how should FIs approach their future onboarding technology strategy given stressed resources and tight budgets?
In the webinar, the experts at Thomson Reuters review strategies that various types of FIs can deploy in order to accelerate their adoption of technology to support their onboarding and due diligence processes.
Here are the questions and answers from this presentation:
Q: How do we mitigate the risk of identity theft? And this is where we do not do face-to-face validation of who is submitting the documents?
A: Really important question because there’s two points to identity today. Is the person real? Obviously, does this person exist. Is that person presenting to me? That’s definitely a technology challenge.
There are a lot of really good solutions and there’s so much to answer in that authentication question. So you need a two-pronged approach. Is the document authentic and is the person who they say they are?
Q: What are some good and credible digital sources to use to verify a person’s ID?
A: You should be able to talk to vendors and say what’s your ID verification menu of options?
In our case, we have a global directory of people, We can tell you if they register into a public records database across the globe. We can do the same thing with a company globally.
You want to know the menu of items, whether it’s their credit bureau data, utility records, service ID, records, the list goes on and on. But you should talk to vendors to see how they can help solve the non-documentary component, in my opinion.
At the end of the day, it comes down to not just one single source of data but a myriad of data points. But it is also the absence of those data points. If somebody comes through, and they are completely clean and there’s nothing on this individual, that is just as much of a red flag as a fraud charge.
Other thing to point out is that you are not required to authenticate every piece of data. We need to make a reasonable effort that the person is who they say they are they’re presenting to be. And there’s lots of ways technology can solve that. I constantly get requests to verify California driver’s license. And I say you actually have to validate the identity through CIP.
I know people don’t have to validate the California driver’s license number, but you want to be able to prove that person’s real and true, and in front of you.
There are easier ways for onboarding through technology like what we’re talking about.
Q: Fraud seems to be the biggest problem that you’re addressing with digital onboarding. But what about AML and CFT risk?
A: So from an AML perspective, you do screening with onboarding data. Screening can confirm if someone is not a bad actor.
In order for your sanction screening or denied party screening to be effective, you have to know who the person actually is in order to verify that they are not a risky person. If you can establish who they are, then it gives you the opportunity to properly screen.
Once you know your customer, then you can properly identify your fraud risk.
And with those two pieces in place, you can screen effectively against people you’re not allowed to do business with.