Everything Your Organization Needs to Know About Document Verification

The revolution in digital technologies has also led to adverse consequences as it has paved the way for cybercrimes, including hacking, phishing, identity theft, document forgery, and fraud. Therefore, it is highly critical for businesses and financial organizations such as banks to resort to authentic and convenient methods of document verification. This is also crucial in AML/CFT compliance and saves banks and other financial organizations from becoming a medium of illicit monetary flows.

Document Authentication – An Essential KYC Procedure

Organizations conduct their customers’ document authentication as an essential KYC procedure. Banks, cryptocurrency exchanges, and other financial institutions must adopt authentic document verification procedures to ensure security and efficient KYC compliance. Moreover, this is mandatory for complying with anti-money laundering and counter-terrorism financing laws. The verification of documents includes all government-issued identity proofs such as passports, financial statements, utility bills, licenses, etc. Their verification is necessary to confirm the customer’s identity and ownership by the financial organizations, especially banks. Identity authentication through document verification is crucial for fraud deterrence and eliminates the opportunities for fraudsters who engage in financial cybercrimes.

Process of Document Checking in Financial Institutions

Financial organizations usually follow four steps that comprise the traditional document verification process. They are enlisted as follows:

1. Document collection
2. Data extraction
3. Document validation
4. Manual verification

Banks conduct manual document verification when their employee checks the customer’s documents. Manual document checking is susceptible to human error. It poses a significant risk to the KYC procedures, compromising their accuracy and transparency. Manual processes consume more time and effort resulting in a high cost of resources. Moreover, they lag behind in fraud detection and prove inefficient for financial organizations in mitigating the possibilities of financial crimes. Hence, financial organizations must adopt automated document verification methods instead of manual procedures to ensure precision and transparency in KYC compliance.

Also Read: Patient Verification – Bringing Digitization to the Healthcare Sectors

Online Document Verification – Need of the Hour

The rapid advancements in the fintech industry have led to innovative automated document verification methods. Digital or online document verification is the most advanced method to ensure smooth KYC compliance. It aids banks in quick customer onboarding, meeting regulatory requirements, mitigating fraud, and preventing illicit financial activities. Moreover, financial organizations can easily detect false customer IDs and vigilantly monitor high-risk customer profiles with automated digital verification of documents. It proves crucial in AML/CFT compliance as it saves financial institutions from becoming a channel of illegitimate monetary transactions.

Various artificial intelligence-backed software solutions are designed for this purpose. Financial organizations can benefit from Software as a Service or SaaS-providing companies that offer solutions specially tailored for document verification. AI-backed software is protected with security protocols. It shields customer data from third-party intervention, thus, preventing identity theft and fraud. According to an estimate, manual data extraction methods are expected to be reduced to half by 2024 because of the adoption of AI-based solutions.

Document Attestation via OCR & ICR Technologies

Data breaches have become the biggest concern in cyberspace as fraudsters, hackers, and financial criminals steal data from online databases and use them for unlawful financial activities. Over 15 million customer records were breached globally during the third quarter of 2022. Data theft is a significant threat to financial institutions. Hence, a financial organization must seek AI solutions to combat this threat. Optical Character Recognition (OCR) is one of the automated solutions for document attestation. It aids financial institutions in performing transparent and effective customer document verification for AML/CFT compliance.

OCR functions by reading the machine-detectable parts of the documents by scanning images and extracting information from them. The document’s letters and characters are converted into editable content. Banks heavily rely on OCR in the customer document verification process. It ensures the ownership and legitimate identity of the customer, therefore, assisting a bank’s secure customer onboarding and surveillance. The accuracy level is the most significant advantage of artificially intelligent software, as it is not vulnerable to human error.

ICR and Verification Documents

Intelligent Character Recognition, or ICR, is a revolutionary and state-of-the-art upgrade in OCR. By 2030, about 80 percent of business-to-business transactions will be entirely digital. ICR technology is a ground-breaking innovation in character recognition software due to its quicker processing and precision during document verification. Contrary to OCR, it is adaptive and can be trained according to document layout. Its deep learning capability can detect any document style and font. Another fundamental advantage of ICR technology is its continuous learning ability which can prove time and cost-efficient in the longer run. ICR handwriting recognition is the most unique and powerful feature introduced in ICR/OCR technologies. It identifies and digitizes information from handwritten documents quickly and without human effort with utmost accuracy. ICR can enhance an organization’s KYC customer onboarding while preventing data breaches, identity theft, and other extreme financial crimes such as money laundering and terrorism financing.

Also Read: Identity Verification Solutions help Businesses to meet KYC – AML Guidelines

Conclusion

In a nutshell, document verification is a vital customer onboarding procedure for any organization, especially banks and financial institutions. It ensures efficient KYC compliance and prevents crimes like document counterfeiting, identity theft, etc. OCR and ICR are the software solutions introduced to ease document verification processes.