Businesses implement customer verification processes to ensure their customers have presented accurate documentation to verify they are who they say they are. Customer verification is often required to ensure that an organization complies with government regulations and guidelines. It can also help lower the risk of identity theft or fraud, and can help prevent the legal and financial costs resulting from the use of incorrect customer information. 

Another important benefit of customer verification is that it can help protect customers from fraudsters attempting to impersonate them. This helps secure a company’s customer base in the face of malicious actors. 

From the business’s perspective, preventing fraud not only protects against theft but also allows the company to avoid having to deliver a product or service to the wrong recipient, which can also incur costs. 

Businesses use customer verification to comply with regulations that require Know Your Customer (KYC) and anti-money laundering (AML) procedures. Compliance is important for avoiding penalties and fines issued by law enforcement and regulatory bodies. 

In this article, you will learn:

Why is Customer Verification Important?

Here are several industries and sectors that are either required to implement customer verification processes or could significantly benefit from this technology:

  • Financial institutions—must meet strict compliance requirements, including anti money laundering (AML) compliance that involves screening customers to prevent criminal activities. Verifying customer identity is a critical component of maintaining compliance and preventing money laundering. 
  • eCommerce and digital services—selling goods and services online involves handling monetary transactions. There are strict regulations governing these transactions, the majority of which require customer verification. For example, age verification is important for merchants selling age-restricted products like alcohol, tobacco, and gambling services. 
  • Social media platforms—are afflicted with a huge amount of fake accounts. To combat this issue, social media platforms are using customer verification. 

Types of Customer Verification

Types of customer verification services

Attribute Verification

Designed to immediately verify credentials. An attribute verification system employs several verification methods like SSO-based validation and IP-based verification, and cross-references credentials with authoritative data sources.

Identity Verification

Designed to ensure customers provide true identity information. An identity verification system uses documentary verification to check the authenticity of identity documents like drivers licenses and passports. It can also use non-documentary verification to check identity information against authoritative sources like a credit bureau or government data.

Attribute verification methods

Attribute verification and identity verification systems may use any of the following methods when validating identities:

Asset Review

The goal of an asset review is to confirm that all identification documents are uploaded as valid document types and include all required data. It is typically performed by document review specialists.

Instant Verification Systems

An instant verification system compares verification data against one or more sources. The goal is to confirm that submitted field data matches authoritative data sources. 

Validation

Validation processes match submitted organization ID and email address domains against a preconfigured set of valid domains listed for the organization ID.

Email loop

An email loop employs the delivery of a tokenized link to the specified email address. Validation is achieved when users receive and click on the link, providing the token as validation. 

IP address

IP addresses can help verify that the user is associated with a certain organization ID, like those created for universities.

SSO

Single sign-on (SSO) verification  requires users to successfully log into an account using user credentials. 

Honor system

An honor system helps indicate that a verification process is successful by asking the user to verify information in an online form.

Modern Customer Verification Solutions

Optical Character Recognition (OCR) Verification

Optical Character Recognition (OCR) is an identity verification tool that automatically extracts data from official documents. OCR technology helps speed up the Know Your Customer process by automatically extracting information from both digital and paper formats. The extracted information can be checked against official sources, using a digitized process that eliminates human error and reduces the risk of tampering.

OCR enables the scanning of documents for relevant information so that customers don’t have to physically send sensitive documents. 

Face Match Identity Verification

Face Match is a biometric facial recognition technology for ID verification. It provides much more accurate face recognition than a human verifier. Face Match uses images found in official databases to match the supplied image with the identity of an applicant. 

Liveness Check Verification

Many ID verification mechanisms rely on photos of human faces. However, fraudsters have discovered that it is easy to spoof photo-based identification, by obtaining images from social media or other sources and displaying them to verification systems. Traditional verification systems were not able to distinguish a photo from a live person. 

Liveness checks address this challenge by asking users to verify their identity by showing their face on a live camera feed. Typically, applicants are asked to show their face next to an official identity document. In addition, the applicant is required to prove they are live on video, by performing actions like moving their head or blinking. Other systems use AI algorithms to analyze live video feeds and determine if they are real or spoofed.

AML and Sanctions Checks

Modern solutions can automate the process of conducting anti-money laundering (AML) and sanctions checks. This dramatically reduces the time and cost of checking individuals against sanctions lists and identifying misconduct such as money-laundering and terrorist financing. 

Manual AML processes can be time-consuming, often requiring thorough investigation. A verifier examines individuals by running their official documents against a sanctions list. If an individual or organization is flagged, they might be subject to an embargo, diplomatic restrictions or asset freezes.

The manual sanctions checking process involves several third-party verifiers and can take a long time to gather their responses. This process is also prone to error.

Today, it is possible to automate the process of conducting AML and sanctions checks. The individual’s verified identity can be compared against sanctions lists with immediate results. The digital process also increases accuracy, significantly reducing the risk of accidentally missing sanctions.

Customer Verification with BlueCheck

BlueCheck’s industry leading identity verification infrastructure enables merchants to grow their business faster. Serving a wide variety of industries, our solutions are custom tailored to the unique needs of our customers, including PACT Act and eCommerce compliant offerings. 

Schedule a call with a BlueCheck specialist to learn more about our Age & ID Verification solutions. Ask about price savings when bundled with Payment Processing services.