The identity of an individual facilitates recognition. Recognition of an individual comes in handy in many ways, that is, in different contexts and provisions. When it comes to financial transactions and business, identification and recognition will always be pertinent. Definitely, it is rational for every business entity, individual, company, and financial institution to confirm an individual's identity through proper recognition processes. This is done in order to avoid the successful perpetuation of malicious activities. 


What Does Identity Proofing Mean?


To the layman or mind, Identity Proofing may mean or involve verbal confirmation of the genuine of one's identity to accelerate recognition. However, Identity Proofing refers to the process of verifying a user’s identity, that is, authenticating that they are who they say they are. 


If a certain customer claims to be; John Doe, there must be evidence to authenticate that he is John Doe. It may sound like mere authentication based on a username and password. However, identity proofing comes before all of that. It comes into play even before a user or a customer gets to have a username or a password. 


Identity proofing refers to verifying an individual's identity to ensure that they are who they claim to be. It is a critical step in many industries, such as finance, healthcare, and government, where personal and confidential information is exchanged.


Identity proofing involves collecting and verifying various forms of identification and personal information, such as government-issued IDs, biometric data, and personal background information. This process is used to confirm an individual's identity and ensure they are authorized to access certain resources or services.


The aim of the process of identity proofing is to establish trust in the identity of an individual to prevent fraud and identity theft. It is an important part of identity and access management (IAM). It is often used with other security measures, such as multi-factor authentication, to protect sensitive information and systems.


Why does Identity Proofing Matter?


According to credible sources, identity fraud or theft costs the United Kingdom about four billion a year. There are an estimated 28 million data breaches across the UK every year. Using an email address and a phone number alone is not enough for a secure identity and access management system. It tells very little about an individual. 


This is why it is important to go beyond those two pieces of information and go through a full KYC process as a business. Proper Identity proofing reduces data breaches by eighty percent since eighty percent of data breaches and identity fraud are associated with weak, reused, and stolen credentials. 


For one, identity proofing is an essential component of KYC regulations. KYC refers to the process adopted by financial institutions and businesses or corporate entities to accurately verify the identity of a potential customer or incoming customer, and their risk levels are also assessed. 


KYC regulations aim to prevent money laundering, terrorist financing, and other illicit activities that can be perpetrated or facilitated through financial processes. Identity proofing is important to KYC because it enables financial institutions to verify their customers' identities accurately. This process involves collecting and verifying various forms of identification and personal information, such as government-issued IDs, biometric data, and personal background information. It ensures that the person applying for financial services is who they claim to be and that the personal information they provide is accurate.


 Fraud and money laundering risks can be mitigated through the KYC process by conducting appropriate identity proofing. It also helps financial institutions comply with regulatory requirements and avoid potential fines and reputational damage associated with non-compliance. 


It is important to know that Identity proofing is crucial to the KYC process. It enables financial institutions to accurately verify identify their customers and comply with the regulations provided and, to help prevent financial crimes and protect the financial system's integrity.


How is Identity Proofing Carried Out As A Crucial Part Of The KYC Process?


Identity proofing is done on KYC by collecting and verifying different authentic forms of identification and personal information from the customer. Here are the usual ways or steps which are involved with KYC.


a.  Customer’s Information Is Collected


Customers are asked to provide personal information like; name, date of birth, address, a form of identification issued by the government, such as a passport, photo card, driving license, or national id card. These will serve as a form of proof for a person's identity and existence. 


b. Identity Documents Are Verified


Identification documents provided by the customer will be verified for authenticity and validity.  Verification may involve checking the documents' holograms, watermarks, and other security features. 


c. Personal Information Provided Are Verified


Personal information provided by customers is verified through multiple sources, like credit bureaus, public records, and other official databases.


d. Biometric Verification


KYC processes can also include biometric verification, such as facial recognition and fingerprint scanning, to confirm the identity of the customer. It will also help determine if the customer has been on any watchlists or has a history of suspicious or criminal activity. 

e.  Risk Assessment


 The total information collected is analyzed to assess the customer's risk level. This also determines if the customer is on any watchlists or has a history of suspicious activity. 

f. Ongoing Or Continuous Monitoring


KYC requirements will involve monitoring the customer’s activity in order to detect any suspicious behaviour or changes in risk level. 

Certainly, identity proofing for KYC involves a comprehensive verification process that ensures the customer's identity is accurately verified and their risk level is assessed. The procedures may vary depending on the financial institution's policies and regulatory requirements.

Identity Verification Methods That Are Commonly Adopted In KYC Processes 


It is not confusing to ascertain materials and ways to facilitate identity proofing. However, as time advances, methods advance as well. This section will explain and discuss identity verification methods that are commonly adopted. Identity verification aims to ascertain or, more technically, authenticate a potential customer's acknowledged identity in the KYC process. This is a crucial step to preventing the preparation of financial fraud and other malicious or illegal activities that may be facilitated with financial irregularities, like money laundering to drug trafficking. 


1.  Social media verification


It may seem unconventional, however, with the widespread use of social media and the equivalent growth of users on various social platforms. Social media verification may be a method to consider. However, it may be easily manipulated in some ways. Social media platforms can be used to verify an individual's identity. This involves confirming their account details and comparing them to their government-issued ID.

2. Biometric Verification


Biometric verification: Biometric verification involves using unique physical characteristics, such as fingerprints or facial recognition, to establish a customer's identity. This method is becoming increasingly popular, particularly in the financial industry.


3. Knowledge-based authentication


Knowledge-based authentication involves answering a series of questions about the personal information only the true individual would know, such as the name of a first pet or the street where they grew up. However, this is not used in an initial KYC process. And may be considered an outdated method, but it was commonly used in the 2000s. 


4. Government-issued Identification


Using government-issued identification is one of the most common ways to prove a customer’s identity is by presenting a government-issued ID, such as a passport, driving photo license, or national ID card. It still remains one of the standard methods to adopt.


5.  Utility Bill Verification


Some organizations may require individuals to provide a utility bill as proof of their address. This can be used together with other forms of identification to verify an individual's identity.


6. In-person Verification


 Organizations may sometimes require individuals to present themselves in person to confirm their identity. This can involve meeting with a representative of the organization or going to a designated location for identification purposes.


7. Notarized documents


 Notarized documents can be used to prove an individual's identity in certain circumstances, such as when applying for a loan or opening a bank account.

8. In-person verification


Organizations may sometimes require individuals to present themselves in person to confirm their identity. This can involve meeting with a representative of the organization or going to a designated location for identification purposes.


9. Background Check


Background checks can also be used to verify an individual's identity. This involves conducting a search of public records and databases to confirm personal information.

Bottom Line


Various organizations adopt different methods to verify the identities that potential customers are presenting. It is a crucial part of the KYC process and will serve as a major shield against illicit financial activities. Businesses can quickly perform KYC, biometrics verification, fraud detection, and anti-money laundering checks with Youverify


Join 100+ leading companies that use Youverify for identity spoofing for compliance and real-time risk detection. Request a demo today.