According to the National Council on Identity Theft Protection, about a ⅓ of Americans will encounter some form of identity stealing in their lifetimes. In 2021, losses amounted to more than $5.8 billion, and the issue is growing as cybercriminals become increasingly sophisticated.

Thus, the increasing issue of identity theft requires prompt attention to combat it with robust document verification in banking. This ensures that the customer is legitimated and has authentic documents with no records of past criminal activities such as money laundering or identity theft. 

This article will explore how document verification in banking prevents several threats and enables the financial organization to comply with regulatory requirements. 

Process of Document Verification In the Banks 

Document verification in banking is the process of authenticating customers’ credentials before their onboarding. It is a diminutive segment of the whole KYC process, known as Know Your Customer, and works as its name suggests. 

Banks require several identity documents from the applicants to know them and verify their genuineness. The documents include a government-issued ID card, social security card, proof of address and income, etc. 

The document verification, along with the customer due diligence, even tracking the past records of the applicant to make sure that they have a clean history and were never involved in money laundering or other financial crimes.

Physical and Digital Document Verification Process 

The document Verification transpires in both physical and digital spaces. Physical document verification occurs at banks where the authorized person verifies the document manually or by some authentication machinery, especially scanners. 

However, digital document verification can occur anywhere regardless of the. It requires the user to submit their credentials online by scanning them on the mobile phone or scanner. The automated software then identifies the genuineness of the documents and then finds similar results based on data to verify the applicant. 

Both verification processes provide accurate results, but digital document verification is much faster and more convenient. 

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Essential Steps of Online Document Verification

There are some crucial steps to take for online document verification. This intricate method prevents fraudulent activities within the banking system from capitulating that online document verification depends on several factors. Including the person banks are trying to build a trustworthy relationship with and the types of documents the bank is dealing with. The online document verification in banking  can be divided  into four prominent steps:

• Document collection
• Data extraction
• Document validation
• Manual verification

KYC Compliance With Document Checking

 KYC, or Know Your Customers, is a regulatory requirement that banks and other financial institutions must employ. Regulatory bodies like the Financial Action Task Force (FATF) make sure that businesses know their customers and overlook the international criminal activities of money laundering.

The KYC processes include customer due diligence to ensure the applicant’s authenticity during onboarding and before involving the user in transactions. Document checking is a paramount factor that defines mutual trust between customers and banks. 

Bank Document Verification Requirements 

Document verification in banking requires the customer’s personal credentials to authenticate their genuineness. Here are the requirements for document verification: 

• Birth certificate
• Social Security card
• Proof of address 
• US military card
• Permanent resident card
• Business documents
• Certificate of citizenship
• Bank statements
• Proof of ownership 
• Tax returns
• Educational certificate 
• Employment records
• Proof of insurance

Online Documents Verification Advantages 

Document verification in banking has numerous advantages. It saves time and costs while securing the customers’ and bank’s interest. Document verification is a widely recognized and highly efficacious way to meet regulatory prerequisites. As in some countries, it is essential for the financial institution to opt for KYC and AML compliance in order to stay safe and have the records of the people they are working with. Even if financial institutions are not legally required to verify user identity, doing so can help mitigate identity theft and other forms of fraud on your platform.

Incorporating identity verification into your onboarding process can significantly help in building customer trust in your business or platform. When all users undergo the same verification, it becomes much harder for bad actors to slip through and potentially cause harm. When combined with automation, online document verification can be completed quickly, often in seconds. This is significantly faster than manual review, which can take from minutes to days, depending on the specific processes used.

Final Statement

Document verification in banking is crucial for preventing identity theft and financial crimes. It involves meticulous scrutiny of customer credentials and compliance with regulatory standards. By embracing both physical and digital verification, banks can streamline onboarding procedures and defend against fraudulent activities.

Integrating identity verification into the KYC framework, such as Hellstar solutions, demonstrates a commitment to due diligence and regulatory compliance, fostering trust between institutions and customers. Overall, document verification is essential for safeguarding financial integrity and preserving the banking ecosystem.