How Identification Document Scans Led To Industrial Fraud Prevention

Banks, airports, retail stores, insurance companies, Fintechs, crypto platforms, e-commerce stores, all require identification document scans. What makes it necessary is that this step is mandatory for KYC (Know Your Customer) compliance – non-compliance to which can lead to hefty fines and penalties. However, staying compliant is not a bed of roses. Mismanagement in identity proofing not only leads to monetary fines, but also decreased levels of customer satisfaction, acquisition, and loss of data security.

For this purpose, document verification acts as the perfect solution to solve all these problems. With the help of automated AI-powered identification document scans technologies, a seamless identity verification process can be implemented.

Document Validation – Why it Became the Law 

False impersonation is regarded as an offense that can lead to dire consequences. Commonly known as identity theft, it refers to the act of faking an identity and using someone else’s credentials for illegal benefits. Identity theft can be as simple as creating a fake profile under the legitimate individual’s name and using it to post hate comments or rude remarks. On the other hand, it can also be used to file for false insurance claims, gain access to PPP loans, medical care programs, or simply to purchase products online in someone else’s name. 

Back in 1988, the Identity Theft and Assumption Deterrence Act was passed which prohibited the act of identity theft, making it punishable under law. Under this legislation, any individual found to be transferring or using the identity details of another individual, without lawful authority, has committed a serious offense. The United States Department of Justice has announced imprisonment of up to 15 years, confiscation of personal property, and monetary fines for any person found guilty of this crime. 

Despite these regulations and control measures, identity theft has been gaining ground. The FTC revealed that 1.3 million identity theft reports were made in 2020, a tripled value compared to 2018. 

Document Authentication For Fraud Minimization 

To minimize the frequency and number of frauds, global regulatory authorities have devised a set of KYC and AML (Anti-money Laundering) rules that encourage industries to stay compliant with preventive measures. These regulations are devised by authorities as to the FATF, FinCEN, FinMA, FinTRAC, etc. – all of which are responsible for charging fines to non-compliant firms. 

To adhere to these rules, businesses have to implement proper KYC procedures through the document validation process. During this process, identification documents of the customers are used to verify the true identity of customers. By verifying the customer’s identity document, companies can ensure that fraudsters are filtered out and online databases have been safeguarded against external threats.  

Previously, this process was being implemented only by financial institutions such as banks. Today, most industry sectors, especially online businesses, have started employing document checks as a mandatory security measure. Through online document verification, customers can interact with businesses remotely and prove their identity through valid identification documents, such as a government-issued ID card, recent utility bill, rent agreement, tax return bill, bank statement, credit/debit card, passport, driver’s license, etc. 

So, How Are Identification Documents Scanned Remotely By Banks?

Identity documents are scanned through identity verification solutions. These solutions are artificial intelligence-based and are integrated into the business’s website or application. When the customers open the website or the app to open a new account, for example, they are required to prove their identity. So, the next step is for the customers to take a picture of, or upload, an identification document. The software scans the document, extracts information through OCR (Optical Character Recognition) technology within seconds, and presents the verification results in the back office as well as on the customer’s screen.

If the verification process is successful, the customer is allowed to continue with the activity they initially set out to do. In the event of incorrect ID information, access to the system is denied. 

During this process, fake documents are automatically detected. Examples of fake documents include:

  1. Illegal documents – the documents that are completely fake and are missing rainbow prints, the document holder’s signature, etc.
  2. False documents – documents that belong to someone else and are illegally being used in an attempt to disguise the real identity
  3. Modified documents – these documents have been altered by criminals by changing the font size, style, format, etc.
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