Are face to face Know Your Customer (KYC) checks becoming a thing of the past?

By Legal Futures Associate VirtualSignature

Before work can be started on any legal or high-risk financial matter, professional services firms need to complete Know Your Customer (KYC) checks and they need to complete them quickly.  The identity of a client must be established in order to comply with Government regulations and to help avoid the risk of fraud.  Lawyers, bankers, accountants and estate agents cannot proceed with their services until that due diligence has been carried out properly.

Before the digital age, all identity checks were carried out manually, whereby a client would be invited to meet with their solicitor or accountant face to face and this method is still valid and can even be preferential in the cases where clients are vulnerable or do not own a smartphone or passport for example.  However, this procedure is not without its challenges.  For example, setting a meeting time to suit both lawyer and client needs to be mutually agreed which could be subject to cancellation and re-arrangement.  Clients may miss appointments or forget to bring the correct documentation with them.  Then at least thirty minutes has to be set aside for welcoming them to the office, verifying their identity and taking photocopies of their passport and proof of address, as well as asking them to sign the relevant paperwork such as an engagement letter.

Relying on a manual process to verify the passport itself includes several checks, is time consuming and requires competency training.  There is still no guarantee that a fake passport will be detected.  These checks include:

  • Checking whether the client’s face matches the photograph on the passport
  • Checking that the date of birth on the passport is realistic when considering the age of the client
  • Checking whether the passport is in date
  • Studying the data in the Machine Readable Zone (MRZ) to cross check data such as date of birth and sex
  • A physical check of the passport including the stitching to check for tampering
  • Holding the passport to the light to study the holograms

The KYC process in the digital era

During the pandemic, law firms were forced to find ways of overcoming the restrictions that social distancing was placing on their ability to carry out business and so they began to source digital methods.  Once in use, the additional benefits of this new technology came to light:

  • Saving valuable time that could be better spent on other tasks
  • Reducing the risk of fraud
  • Having the ability to instantly generate an audit trail and decision-making report, for decision-making and compliance purposes
  • Offering their clients an efficient and streamlined way to transact remotely

Automation has meant that the process of carrying out an ID check and verifying the client’s address can be completed in minutes without the need for a face-to-face meeting.  End users don’t even have to leave home, and the procedure is quick and simple for them to follow.  In under two minutes, a client can take a video selfie, capture an image of the photo page of their ID document and use their smartphone to scan the chip in their passport.   The use of NFC (Near Field Communications), geo-location, anti-tamper and anti-spoof technology are all deployed in the background to provide 100% accurate results.  The addition of Open Banking technology to validate identity and source of funds information provides an extra layer of certainty.

The Government is pushing for the use of digital methods for ID verification in its drive to combat fraud and professional services firms will continue to be held responsible for making sure these regulatory checks are done properly or risk fines, so it’s no wonder that the old manual methods are being replaced.  The cost of using this technology doesn’t have to be high and can often be passed on to the client as a disbursement.

From the clients’ point of view, where the onboarding journey is uninterrupted and if the branding and presence of their chosen law firm is recognisable throughout the process, they benefit from an enhanced experience and added reassurance that that they are dealing with a trusted entity.

VirtualSignature-ID is a UK Government approved Identity Service Provider (IDSP) that offers professional services firms a suite of end-to-end eSignature, ID verification, AML and KYC solutions that can be incorporated into existing workflows and case, practice and document management systems.  If you would like to find out more or see a demonstration please call us on 0333 335 5176 or contact us.


Associate News is provided by Legal Futures Associates.
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