Remote verification is the backbone of onboarding in regulated firms. Done well, it sets the tone for a frictionless customer experience while keeping financial crime in check. Done poorly, it frustrates users, slows growth, and invites regulatory scrutiny. The challenge? Striking the right balance between security, compliance, and usability.
With fraud on the rise and regulatory expectations tightening, getting this right isn’t optional. Firms need a clear, efficient, and compliant approach to remote verification that doesn’t alienate legitimate customers.
Setting the standard: What regulators expect
The Financial Conduct Authority (FCA) expects firms to have strong identity verification procedures in place. The UK’s Money Laundering Regulations require firms to verify customers effectively, using a risk-based approach. This means adopting verification measures proportionate to the risk level of the transaction or customer.
“The relevant person must – (a)identify the customer unless the identity of that customer is known to, and has been verified by, the relevant person; (b)verify the customer’s identity unless the customer’s identity has already been verified by the relevant person; and (c)assess, and where appropriate obtain information on, the purpose and intended nature of the business relationship or occasional transaction.”
Firms also need to be mindful of evolving guidance from the Joint Money Laundering Steering Group (JMLSG) and updates from the UK government on financial crime prevention. Staying compliant means keeping pace with regulatory developments and implementing solutions that meet evolving expectations.
The right tech for remote verification
The market is awash with identity verification solutions, but not all are built for regulated firms. Choosing the right tech means looking beyond flashy features and asking the hard questions. A tool that’s popular in general e-commerce might not tick the right compliance boxes for financial services. Biometric verification, including liveness detection and facial recognition, must be reliable and fair, avoiding biases that could trigger regulatory or reputational issues. Document verification should be capable of handling local and international passports, driving licences, and other ID documents accurately, and at speed.
The system should also scale with the business, adapting to higher volumes without compromising security or performance.
Striking the balance between security and user experience
A clunky verification process leads to drop-offs, frustrated customers, and lost revenue. At the same time, a process that’s too lenient opens the door to fraud and regulatory action. The sweet spot is a system that offers a seamless experience while maintaining rigorous checks.
Layering verification methods – combining document checks, biometrics, and global databases – can improve accuracy without creating unnecessary hurdles. Automation speeds up processing times while reducing manual review workload. Analysing where users drop off in the process can highlight areas for improvement and help streamline the experience.
Addressing fraud risks
Fraud detection is a moving target. As firms tighten controls, bad actors adapt. The key is to build an approach that is proactive rather than reactive. Synthetic identities, document forgery, and account takeovers are common tactics used by fraudsters. . ID&V systems can detect inconsistencies that might be overlooked by traditional verification methods. These systems assess document authenticity, cross-check user details against trusted databases, and flag irregularities in submitted identification that may indicate fraudulent intent.
What’s more, screening customers against PEP, sanctions, and adverse media lists prevents high-risk individuals from being onboarded. Ongoing monitoring of customer risk profiles can also help firms to catch fraudulent activity after onboarding and throughout the customer lifecycle, reducing risk exposure in the long term.
Compliance doesn’t end at onboarding
Meeting verification requirements isn’t just about the initial customer sign-up. AML obligations extend throughout the customer relationship. Firms need to maintain up-to-date records, reassess risk levels periodically, and trigger re-verification where needed.
Monitoring for red flags such as unusual risk patterns, changes in behaviour, or discrepancies in provided information can signal the need for further checks. Refreshing customer due diligence (CDD) data periodically, especially for high-risk customers, should be built into your compliance workflows. Regulators expect firms to demonstrate compliance at any time, so keeping well-documented verification records is essential for audits and inspections.
The cost of getting it wrong
A weak verification process isn’t just an operational headache – it’s a compliance risk. Regulators have shown they are willing to take action against firms that fail to implement proper controls. Failing to verify customers correctly can lead to financial penalties, and reputational damage. To boot, losing customer trust due to fraud or security breaches can also have long-term consequences.
Remote verification is a balancing act, but it’s one that firms can get right with the right approach and build a verification process that is secure, compliant, and user-friendly.
Importantly, the key is to stay adaptable. As fraud tactics evolve and regulatory requirements shift, firms that continuously refine their approach will be in the best position to grow securely and keep financial crime at bay.
