Five Reasons for Identity Verification in 2008

Answer by Michelle Thiel, CAMS, Sr. Director of Data and Compliance - ChoicePoint

The following factors are at the top of my mind regarding ID verification in 2008.

Proving that I exist is one thing. Proving that I am Michelle Thiel as I sit at your customer service desk is something else. Similarly, proving that a fraudster is not me when he/she calls, clicks online or enters a branch can be quite complex. Confirming the true identities of your customers establishes the foundation for your identity theft prevention, anti-money laundering and fraud prevention programs.

1. With millions of identities compromised in the last few years, it is likely that someone will attempt to use a fraudulent ID at your institution.

A recent survey by the Federal Trade Commission indicates that one in ten American adults (27.3 million) has been a victim of identity theft in the past five years, and nearly 10 million have been victims in the past year1.    The same survey reports that related losses to businesses and financial institutions are in the tens of billions of dollars each year2.    In other words, the problem is significant. If it has not happened yet at your institution, it may be only a matter of time.

Successful ID verification programs can help reduce the likelihood of fraud,

a persistent problem with substantial costs to financial institutions. Your ID verification program can contribute to a significantly improved bottom line through reductions in identity theft and fraud loss.

Banks can position themselves ahead of their peers by leveraging the value consumers place on protection of personal information.

One in six Americans report having bought privacy protection services or products to avoid identity theft, fueling a growing national market estimated to be worth $2.5 billion annually3.    Banks can market their unique ID verification efforts, as well as their commitment to privacy through procedures to protect their customers' identities.

ID verification helps prevent damage to your bank's reputation.

As we all remember from the Riggs Bank incident, damage to your reputation can be detrimental to the point where your organization is ultimately dissolved. The well-known Riggs example provides an extreme consequence, but reputational damage can erode your brand value, potentially hurting your bottom line.

In addition to making good business sense, regulations require ID verification

in banks. A risk-based program to verify your customers' identities is mandated under customer identification program (CIP) rules4.    Section 352 of the USA PATRIOT Act and subsequent regulations call for the development of risk-based compliance programs regarding anti-money laundering programs5.    In addition, the FTC and the federal financial institution regulatory agencies released final rules on identity theft "red flags" which call for financial institutions and creditors to adopt a written identity theft prevention program6.    Like the CIP and AML regulations, the regulators took a flexible, risk-based approach. Certain steps are crucial to adequately assess "customer" risk, and they begin with establishing the true identity of your customers.

Confirming the true identities of your customers establishes the foundation for your identity theft prevention, anti-money laundering and fraud prevention programs. ID verification programs can be strategically designed to balance customer friction with convenience, giving your customers peace of mind and contributing to your bottom line.

1 http://www.ftc.gov/opa/2003/09/idtheft.shtm
2 http://www.ftc.gov/opa/2003/09/idtheft.shtm
3 http://www.calpirg.org/home/reports/report-archives/campaign-finance-reform/campaign-finance-reform/financial-privacy-in-the-states
4 http://www.fincen.gov/finalciprule.pdf
5 http://www.fincen.gov/352fininst.pdf
6 http://www.ftc.gov/opa/2007/10/redflag.shtm