Identity Verification

What is Identity Verification? 

Identity verification refers to the process of establishing an individual's identity and cross-checking that identity against various information sources to verify that it is correct. In other words, it is the process of confirming that an individual is exactly who they claim to be.

Identity verification can be required for a wide variety of reasons. Sometimes, it can be required by national regulatory law; other times, a business may want to go beyond legal and regulatory requirements in order to better mitigate risk and secure financial transactions. 

Identity verification spans nearly every industry: the betting industry verifying a player’s age; insurance companies needing to verify a client’s identity to establish the associated risk; banks verifying the identity of a client opening an account; real-estate companies verifying buyers – the applications for identity verification are nearly endless. 

Difference Between Identity Verification and KYC 

The broad concept of identity verification is closely linked to the term Know Your Customer (KYC). While identity verification is a broad term, KYC specifically refers to the procedures and mechanisms that are used to verify the identity of customers, typically before conducting business with them. 

When conducting KYC checks, a business will typically be verifying:

  • That an individual exists 
  • Whether that individual is exactly who they claim to be 
  • Whether that individual is eligible to receive the product or service in question 
  • Whether that individual poses a threat of money laundering or other such crime

KYC checks, therefore, forms a crucial part of helping a business to verify that an individual is who they claim to be and that all the information associated with them is correct. 

Identify Verification Systems and Methods 

From the perspective of identity verification, an individual’s identity is a combination of several defining characteristics, which may include: 

  • Full name 
  • Date of birth
  • Physical addresses 
  • Employment and employment history 
  • Physical appearance (biometric information)

These examples can be verified by checking and verifying a selection of documents, which includes: 

  • Identity Document 
  • Driver’s license 
  • Physical addresses associated with the individual’s place of residence and/or business
  • Biometric information (generated from both still and live images of an individual)

Historically, identity verification was conducted manually and often required the physical presence of the individual whose identity was being verified. This manual approach was immensely inefficient and costly, as well as often being inaccurate and more prone to fraud. 

Today, identity verification is conducted online using highly efficient and cost-effective methods that can automatically and quickly source the necessary information from a wide variety of trusted and secure sources, therein ensuring the accuracy of the verification process. 

Online Identity Verification 

Online identity verification enables highly efficient, accurate and cost-effective means for identity verification. Today, online identity verification leverages powerful technologies like biometric information and artificial intelligence to deliver incredibly accurate and reliable identity verification. 

Online identity verification allows for the verification of remote individuals – clients and individuals on the other side of the world can easily verify themselves, while businesses have the capacity to efficiently verify new clients, customers and employees in a seamless remote-onboarding process. 

Furthermore, the personal information necessary for the verification of an individual’s identity can be pulled from a variety of trusted and secure sources, thereby increasing the reliability of the verification. 

Online identity verification tools cater to a wide variety of demands. Basic identity verification can be carried out by verifying an individual’s identity documents and cross-checking them with the information stored in national identity databases. For more comprehensive identity verifications, an individual’s identity can be verified and cross-checked against other databases to determine whether the said individual is a known criminal or a Politically Exposed Person (PEP). 

It is important to note that the exact “characteristics” and data sets that are used to verify an individual’s identity will vary from case to case – some examples of identity verification will be more thorough and will use a combination of several (or even all) of the above examples. 

The exact demands for identity verification will often be determined by the Risk-Based Approach (RBA). An RBA is a system of risk management that adjusts itself depending on the risk level of a country, industry, or specific business. When applied to AML/CFT legislation, an RBA means that obligations for regulatory compliance will vary depending on the risk of money laundering in a specific context (for example, a small, low-risk tech startup will have fewer compliance obligations than a high-risk multinational bank). Due to this tailored approach, an RBA can create efficient AML/CFT programs that are tailored to a specific business or industry.  

Regardless, all personal information will need to be provided with the full consent of the individual being verified. To read more about ThisIsMe’s commitment to privacy and full compliance with both South Africa’s POPIA and the European Union’s GDPR legislation, click here.  

FICA Compliance in South Africa 

The utility of online identity verification is best demonstrated by ThisIsMe’s revolutionization of FICA compliance in 2017. Initially, FICA compliance cost businesses time and money by forcing them to engage in inefficient and lengthy administration that consumed human resources. The labour-intensive process of ensuring compliance also contained many moving parts that rendered it vulnerable to non-compliance or fraud. For customers, FICA compliance entailed complex paperwork and time wasted standing in a bank queue. 

In 2017, ThisIsMe transformed the South African RegTech industry by cutting FICA compliance down from two weeks down to three minutes – an achievement that got the company featured as one of the Emerging 50 Rising Stars on 2018’s FINTECH100 list. 

The transformation of FICA compliance – enabled by new online identification verification technologies – allowed businesses to save time and money and ensure the highest levels of AML/CFT compliance, while consumers benefited from easier documentation provision and near-instantaneous personal information validation. 

Why is Identity Verification Essential? 

Identity Verification forms a crucial part of a global effort to combat financial crime. 

Across the world, rates of economic crime are at historical highs, while the associated financial losses from economic crime continue to break records. 

As the rates of economic crime increase, identity verification services are becoming increasingly indispensable. Record-high rates of economic crime, evolving patterns, changing perpetrators and complex regulatory requirements all combine to form a landscape that can be challenging for SMEs to navigate. In this complex and risky economic landscape, identity verification tools enable businesses to ensure regulatory compliance, mitigate risk, and secure business transactions. 

Identify Verification typically forms part of KYC and Due Diligence procedures. KYC and Due Diligence form a crucial part of risk management and risk mitigation measures for businesses, institutions and organizations across the world and are enabled by identity verification technology. 

Identity verification forms a crucial part of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) legislation. 

Who Needs ID Verification Services – Identity Verification Regulations in South Africa 

Some businesses, institutions and organizations use identity verification tools to mitigate risk and improve the security of their transactions and business relationships. Notwithstanding, many businesses, institutions and organizations are legally obligated to conduct identity verification in a variety of circumstances. In South Africa, these legal obligations stem primarily from FICA. 

The Financial Intelligence Centre Amendment Act (FICA) is South Africa’s central AML/CFT law. FICA aims to secure South Africa’s economy against financial crimes such as money laundering by creating legal obligations for various businesses, institutions and organizations to verify the identities of those they do business with. 

FICA identifies certain businesses, institutions and organizations as Accountable Institutions (AIs). Due to the nature of their business (such as banks), AIs carry greater responsibility and are exposed to heightened levels of risk related to money laundering and other such financial crimes. 

Consequently, South African law requires AIs to comply with a wide range of regulatory requirements that includes identity verification, due diligence, record-keeping, reporting of information, and internal compliance governance. For example, any business, institution or organization in South Africa designated as an Accountable Institution (AI) is legally obligated to carry out a variety of checks related to identity verification before conducting business with a new client. 

The exact compliance requirements for an AI will vary and depend on the AI’s categorization (e.g., asset manager or FOREX), as well as how securely an AI wishes to mitigate risk above and beyond what is required by law.

Identity Verification Services South Africa

By providing world-class identity verification systems, we give businesses the tools they need to effectively mitigate risk and place trust in their transactions. 

As South Africa’s leading provider of KYC, due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how we can help your business ensure regulatory compliance, mitigate risk and secure its transactions, contact our team here