Using mobile ID verification to get up to speed with US AML regulations

April 24, 2017

Although not as rapidly as in Europe, Anti-Money Laundering (AML) regulations are evolving in the U.S., becoming more stringent than ever and toughening their Know Your Customer (KYC) requests for financial institutions and other regulated businesses such as lenders, insurers or gambling companies.

Money laundering has a long and ancient history. For years, it had predominantly been the fail-safe domain of drug cartels although it dramatically changed after 9/11. Modern AML enforcement started back in 1970 with the Bank Secrecy Act (BSA). The BSA mandated FIs to keep a registry of customers’ transactions and report transactions over a certain threshold as well as any suspicious transactions. These requirements meant that banks had to have a better knowledge of their clients, and the requirements became known as KYC procedures.

As AML legislation has become more complex, fines for failure to comply have increased significantly. Between 2009 and 2015, the US government fined banks a total of $5.2 billion.

During the past 50 years, there’s been a flurry of AML activity, only expected to grow given the gaps present in the existing regulations. In an effort to tighten the noose around terrorists using laundered funds to launch an attack and make it even harder for organized crime to finance their activities, the American government has made each iteration of anti-money laundering (AML) legislation more complex. Standards are higher, and penalties for failure to comply are harsher. However, many of the details remain vague, making it difficult for banks to effectively comply with AML rules.

Download this whitepaper, published by and sponsored by Mitek and learn more about the history, the fight against, and the current regulatory landscape surrounding anti-money laundering efforts in the US. 

This report explores how the combination of smartphones and government-issued ID documents creates a powerful and credible weapon for FIs to fight against money laundering: mobile image capture of identity documents.

How does mobile capture for ID document verification work?

To avoid expensive fines and remain compliant, banks are expected to know who is opening an account and the level of risk that each person presents. In order to proactively combat fraudsters, banks have to invest in identity verification while still offering customers a seamless, frictionless digital banking experience that they demand.

Good news is that technology is also evolving, opening the door to remote ID document verification. When done via mobile, identity verification based on ID document authentication presents an elegant solution for complying with KYC and AML regulations without inconveniencing customers.

Let’s do the math: Circa 70% of people in the U.S. have a smartphone, and almost 50% own a tablet. This ubiquity of mobile devices makes mobile image capture for identity verification a sensible way for financial institutions to properly identify their customers without inconveniencing them.

Mobile image capture of identity documents uses algorithms that can validate that the presented ID is a legitimate government-issued document.

Mitek’s technology leverages consumers’ smartphones’ cameras to capture optimal images of their identity documents. Once the image passes a certain quality-level threshold, Mitek’s deep learning-trained algorithms can recognize and classify the ID, extracting required data for automated data pre-fill, and confirming the identity document is in fact an authentic, government-issued proof of identity.

Once the authenticity of the ID is validated, the user can take a step further and take a selfie with their smartphone. The selfie image will be compared instantly to that of the ID document, proving that the rightful ID’s owner is present and tying the ID to the owner in real time, at any time and from anywhere.

New AML regulations support the use of technological solutions, noting that “accurate identification and verification of data of natural and legal persons is essential for fighting money laundering or terrorist financing. Latest technical developments in the digitalization of transactions and payments enable a secure remote or electronic identification.”

Read The State Of Anti Money Laundering and start leveraging these solutions to verify that your customers are who they claim. Since, in all likelihood, regulations for AML initiatives will only continue to become more severe, proactively implementing mobile capture-based identity proofing will allow FIs to screen out potential threats while still offering customers the seamless experience they have come to expect and value.