A good Customer Identification Program ("CIP") can do far more than satisfy regulatory requirements under the PATRIOT Act; it can also assist you in reducing or preventing fraud by increasing the odds your employees will spot fake or altered IDs. And a fraud case in Kansas this week provides an important reminder that it's not just on the credit side of the institution that we need to be guarding against ID fraud. ID thieves can also perpetrate fraud through deposit accounts as well. With ID fraud topping the list of consumer complaints with the Federal Trade Commission last year, there's more need now than ever to make sure your procedures for verifying identity of customers are adequate.
In the Kansas case, two young rap artists apparently decided to finance their budding music career by paying for their studio time through check fraud. Using fake IDs, they opened checking accounts, then wrote checks for expensive merchandise that they sold for cash. The plot was foiled by an alert hotel housekeeper who uncovered their stash of fake IDs and matching checks when changing out a tissue box in their room.
If these young men had targeted your institution, what measures do you have in place that might have defeated them? Do your CSRs view obtaining an ID as simply one more item to satisfy a checkbox on a to-do list, or do they understand that the purpose of identification documents is to aid you in determining who you are doing business with? To accomplish that task, you must equip your personnel with the tools necessary to do the job right.
Having measures in place to truly verify an individual's identity -- and not just checklists of to-do's that involve merely glancing at an ID -- can help a financial institution spot someone who is using a false identity and can thus reduce fraud losses by preventing the institution from opening accounts for scammers and ID thieves.
In some ID fraud cases, the ID used by the thief has been stolen and comparing the signature on the ID with that on the documents being completed at your institution may uncover the fraud. Looking for clues of possible alteration is also important. On IDs where the picture is supposed to be embedded in the document, employees should be taught to run a fingernail across the surface of the document to determine if the picture is raised. And in all cases, comparing the information on the ID (including the picture) with the person is crucial.
One tool that can help is the P.L.E.A.S.E ID Verification Reminder card . It uses an illustrated acronym to remind employees about what to look for each time they are reviewing an ID. It can now be purchased in bulk in the BOL Banker Store for use by all your customer contact personnel.
The I.D. Checking Guide helps you deal with unfamiliar forms of ID documents, such as out-of-state or out-of-country drivers licenses and IDs, immigration-related cards, and federally-issued identification documents.
And for about the cost of one in-person seminar, you can round up a large group of your employees and train them all on identity fraud at the same time with the BOL Learning Connect Webinar: ID FRAUD FACTS: What Every Bank MUST Know - Online Training
Identity Fraud Solution - (since 1988)
Another solution to consider is IDENTITY CHEK. Performing as many as 300 tests on each new identity, it is a highly mature and robust solution. Available from Primary Payment Systems (PPS), it is currently utilized by most of the largest U.S. financial institutions, as well as many credit unions, brokerages, mutual fund companies, check printers and others. What makes this 'CIP' solution so attractive is its ability to perform identity verification, validation, OFAC screening, and fraud detection (including participation in the Anti-Fraud Exchange) as part of one integrated solution. IDENTITY CHEK is available in three flavors: an onsite edition, a web service and a developer service.
Deposit and Payment Fraud Solution - (since 1990) Primary Payment Systems (PPS) is at the center of the largest collaborative effort among financial institutions to prevent deposit and payment losses. On a daily basis most of this country's largest financial institutions contribute and share the status of all of their deposit accounts and stop payment records. In addition, Returns are contributed as soon as decisions are made to no-pay on a particular item. All of this information is maintained and safeguarded by PPS, and housed within the National Shared Databases. Today, over 195 million deposit accounts are represented.
DEPOSIT CHEK, PRIME CHEK, and DECISION CHEK represent a suite of solutions used to deliver this information to financial institution, credit card issuers, merchants check acceptance companies and others. By collaborating and not regarding fraud as a competitive issue, their exposure to losses is far less than for those not participating.
The bottom line is that truly identifying your customer means more than just asking for a document. To keep the bad guys out requires vigilance, training, and the right tools.
Copyright, 2003, Bankers Online. First published on BankersOnline.com 2/20/03. Updated 4/28/03.
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