FinCEN’s Look at Banks’ Customer ID Efforts Points the Way to Increased Digitization

The fraudsters are wilier than ever. The dark web offers all manner of details up for sale, from email addresses to Social Security numbers.

And for banks, the key point of interaction — the initial onboarding of clients — requires a re-examination of the data used to identify and verify individuals and enterprise clients.

As reported at the end of last month, the Financial Crimes Enforcement Network (FinCEN) has requested comments on its Customer Identification Program (CIP) requirements for banks.

The overall goal is to glean insights that would lead to modernization of various identification practices, and in the release last week, FinCEN noted that the request for information “will inform FinCEN’s understanding in this area and evaluate the risks, benefits, and safeguards if banks were permitted to collect partial SSN information from a customer and subsequently use reputable third-party sources to obtain the full [Social Security number] prior to account opening.”

Current anti-money laundering (AML) and customer identification rules require banks to collect a taxpayer identification number from a customer before opening an account, and to collect SSNs.

Combatting Fraudsters and Verifying Identities

Robust verification measures are warranted. As detailed in the report “Fraud Takes on a New Identity,” PYMNTS Intelligence found in collaboration with DataVisor that, per PYMNTS own estimations, 4.6% of transactions recorded by banks  were classified as synthetic identity fraud.

In its annual findings on global financial institution enforcement actions, Fenergo estimated that AML and regulatory penalties imposed on firms surged 57% in 2023 to $6.6 billion.

Separately, as additional PYMNTS Intelligence data revealed, 95% of AML executives are focused on embracing advanced technologies to combat money laundering and other schemes, and 85% of these executives are concerned about the complexity of integrating new technologies. Only 38% of businesses are using document and identity authentication tools.

In one example of the ways in which digital and advanced technologies are being used to give more certainty that entities and individuals are who they say they are, Sandbox Banking and Plaid have partnered to offer automated identity verification solutions for the financial services industry.

This collaboration will bring together banking solutions from Sandbox Banking and identity verification technology from Plaid. The joint efforts will integrate the customer data, via real-time updates, tied to the Customer360 module and customer experience workflows from Sandbox Banking’s Integration Platform-as-a-Service and Plaid’s Identity Verification solution. Account verification, the companies said, will happen in real time.