The onboarding process and the methods of authenticating a client’s identity are likely to change as identity theft becomes more commonplace, according to members of a panel who spoke at the Association of Anti-Money Laundering Specialists’ annual Canadian conference in Toronto on Wednesday.
A request to see a client’s government-issued identification (ID) or receive a scanned copy of that ID if the client is opening an account online, will not suffice, said Sujan Menezes, industry manager of financial services with Mississauga, Ont.-based Microsoft Canada Inc.
“With technology today, it’s very easy to spoof those IDs,” Menezes said. “People make a livelihood of identity theft and collecting IDs and it’s just as easy to create a digital equivalent of those IDs.”
The issue of “synthetic identities” or unverified identities has received attention in recent years. In 2014, Toronto Police Service estimated that there were 200,000 authentic driver’s licenses being used by people who had created synthetic identities, said Peter Warrack, director of risk intelligence at Toronto-based Bank of Montreal (BMO).
The financial services sector is exploring the use of biometrics, which would include facial and voice recognition, in order to strengthen the process of identity verification. In the future, learning more about a potential client through social media profiles may also be considered as one part of a multi-pronged approach to identity authentication, Menezes said.
“That doesn’t mean if you don’t have a Facebook profile, you can’t open an account,” he said. “But if you don’t have any identity outside of [what you are presenting to open an account], that should raise suspicions with institutions.”
However, the use of social media as an identity authentication tool must be used carefully, according to Michael Perklin, head of investigative services and security service at Toronto-based Ledger Labs Inc., a consulting firm that focuses on the issue of blockchain.
“Nothing stops [a person] from creating 100 different social media accounts,” he said.
The sophistication that is inherent in the creation of fake identities suggests that the industry may want to consider a move toward validating the wealth of a new client and not simply his or her identity, said Joseph Mari, senior manager of major investigations in the anti-money laundering unit at BMO.
“If a [new client has] documentation that is legitimate, it is very difficult to say they are not that person,” said Mari. “I would move to validating their wealth. If they’re bringing over a ton of money, ask where did they get that money. If [the funds are legitimate], they will have a track record for their wealth.”
Validating wealth is especially important for a client who is proposing a transaction through the use of cryptocurrency (virtual currency that is encrypted for security). For example, Mari said, should someone go to a financial services firm and present $50,000 to $100,000 in cryptocurrency, which is an unusually high amount to possess, and ask the firm to convert those funds into traditional currency, it would be important for the firm to determine the true source of that money.
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