Jargon Buster: eIDV
In this edition of Blanco’s jargon buster, we’re continuing to help you understand the many abbreviations found in the financial world. This time we’re looking at: eIDV, or electronic IDentity Verification, which is linked to Know Your Customer (KYC) and Anti Money Laundering (AML).
What is eIDV?
Electronic IDentity Verification (eIDV) broadly refers to the online systems used to verify identifications. eIDV accesses publicly-available and private databases to quickly verify an individual’s identity. It does this by using key personal information including name, birth date, social security number, and address as well as other data fields such as financial information. eIDV is particularly useful for financial institutions to rapidly search and verify a person’s identity and assess their risk level.
eIDV is becoming increasingly useful in the finance industry in combination with law enforcement to quickly detect and prevent financial crimes such as money laundering and terrorism financing. It’s also widely used in other industries where verifying a person’s identity is important, such as insurance, real estate and recruitment agencies.
In finance, banks, brokerages, financial advisers and accountants use eIDV to comply with Know Your Customer regulations (KYC) and Anti Money Laundering laws (AML) to help carry out their so-called gatekeeper functions to prevent fraud and terrorism financing.
How eIDV works
eIDV works by checking the data provided by the individual — for example, their name, date of birth, address and social security number — against several databases to find and confirm either a match, a partial match or a non-match. Driver’s licences, passports, birth certificates and citizenship certificates are the most common documents that serve as sources to verify a person’s identity. The databases used to check these source documents can include credit bureau data, police records and transport authority data.
When eIDV accesses and queries databases during an identity check, it searches for data that can be used to validate source documents. This data can include details of a change of address, postal data, property ownership information, details from the electoral register, telecommunications records and utility bills.
The advantages of eIDV
Organisations pay a fee for using eIDV services usually based on how many databases they need to search to verify a user’s identity. Although running eIDV checks on customers incurs additional costs, it is an added level of security and the expense is well worthwhile since it vastly reduces the risk of doing business with individuals posing as someone they aren’t. In this way, using eIDV also works towards a bank or financial institution fulfilling its KYC and AML obligations.
eIDV can detect and warn against fraudulent behaviour if — for example — a potential customer provides a social security number and the eIDV check identifies it as belonging to a deceased individual. eIDV is also particularly useful for identifying individuals who have been placed on international watchlists, for example for being politically exposed, registered on a government sanctions list and suspected of or even convicted of financial crimes. Finally, eIDV is useful for keeping up-to-date on existing clients as well as vetting potential customers.
Watch out for our next article to keep on busting that financial jargon!