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Why retrospective ID investigation is critical for 5AMLD compliance

Time pressure and cost are two big issues faced by those in financial services as they seek to ensure compliance with a proliferation of new know your customer (KYC) and anti-money laundering (AML) regulations.

One of those that recently became law is the Fifth Anti-Money Laundering Directive (5AMLD), with its focus on strengthening transparency rules to prevent large-scale concealment of funds.

However, in the haste to ensure compliance with the likes of 5AMLD it can be easier to focus on implementing these rules around the onboarding of new customers at the expense of existing customer data. Yet, delaying or ignoring putting procedures in place to ensure existing customer data is compliant with the new laws is a risky approach to take because, in many cases, previous onboarding procedures are insufficient for contemporary regulations.

Retrospective ID investigation is the answer

The way forward to guarantee that historic customer data is compliant with increasingly rigorous KYC and AML directives is to deliver retrospective ID investigation.

This can be implemented in two ways. The first is to actively engage with existing customers. Not only will this approach ensure compliance, but help gain additional customer insight that can be used for future targeting. However, this method is not without its issues. Directly approaching customers in this way is costly for the merchant, and the additional administrative communication can be irritating for customers.

Live re-onboarding

There is another retrospective ID investigation option that’s fast, less intrusive - because it avoids customer engagement - and is not as costly. This involves financial services organisations employing existing technology to undertake a behind the scenes ‘live re-onboarding’ process. To implement this it’s vital to source a comprehensive electronic or online ID verification tool containing billions of identity elements worldwide that can check and verify customer data globally. It must be one that has access to trusted reference data, such as credit agency and electoral roll to efficiently and in real-time verify a person’s name, address, phone, email and date of birth. It’s also essential it has access to global politically exposed person (PEP) lists, in addition to the various global watchlists and sanctions checks for AML.

For effective ‘live re-onboarding’, ID documents, including driver’s licences, passports and utility bills - that are likely to be already held on file for customer due diligence - need to be scanned. Then, to determine whether the ID document is real and valid in real-time, and to avoid human error in this process, financial services organisations need to use the appropriate optical character recognition (OCR) and machine readable zone (MRZ) technology. Additionally, the photo ID embedded in these scanned documents supports biometric ID verification, such as facial recognition, which helps those in financial services to securely speed up engagement with customers. 

With increasingly stringent KYC and AML regulations retrospective ID investigation should be implemented by financial institutions as a matter of course across all customer databases, prior to a new directive becoming law. Live re-onboarding that operates behind the scenes is the best approach to take because of its speed, efficiency and reduced risk of annoying customers. It’s also not as costly as the customer re-engagement option. Those serious about live re-onboarding should source technology and data providers proven to deliver best practice ID verification on a global scale.



Comments: (1)

A Finextra member
A Finextra member 11 February, 2020, 17:03Be the first to give this comment the thumbs up 0 likes

Good to see this article, however, I feel it is quite dated in its approach. 5MLD is a challenge, but its also an opportunity to drive change within banks - primarily looking at two areas 1) customer onboarding and the experience that provides 2) onging monitoring of current customers.

Both approaches are dated, but i appreciate these are the best to go with right this second if you need to get compliant in a rush. However, the real answer is to invest in upgrading your systems to a true Digital Identity platform. 

This is a market that may appear to be rather complex, but the benefits of getting it right are massive for banks - ensuring 5MLD compliance but also improved security, reduced risk of GDPR issues being faced and drastically improved levels of customer experience (onboarding and simply in-general). SSI is gaining traction and there are small and large companies starting to really provide powerful solutions in this space, streetcred, evernymn  and to name a few.

If you are looking at your compliance around this space, then its clear for the future that banks need to start investigating digital identity.  

Barley Laing

Barley Laing

UK Managing Director


Member since

28 Jan 2019



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