Identity Verification vs Authentication: What's the Difference?

When onboarding a new customer or client, carrying out a comprehensive AML audit is just one of many things you need to tick off before welcoming them to the company. While we make this process as simple as possible for you at SmartSearch, some overlapping processes still cause confusion, making you wonder, ‘What is identity authentication and how does it differ from identity verification?’.

From a complete and robust customer due diligence (CDD) solution to ongoing reporting tools, our platform offers everything you could need to verify your customers and ensure your own compliance within the AML framework. Recognising that the process can seem complex, at SmartSearch, we keep things as simple as possible for you, with a seamless platform that can be easily integrated into your current digital operations. 

As experts in our field, we can help you stay compliant and educate you on all things AML. Speaking of which, let’s get into the differences between identity verification vs authentication. 

What is Identity Verification?

Identity verification, otherwise known as ID verification, is the process of verifying that a customer is exactly who they claim to be before you choose to do business with them. The process of verification is carried out by creating a profile of evidence using a range of different documents. Failing to carry out robust identity verification could result in financial penalties and regulatory fines.

The Methods of Verification

During the ID verification process, you should spend as much time as possible gathering information from your customer, including their name, address and a valid form of ID. But some platforms, like our own Electronic ID Verification, can provide quicker and more accurate checks. When proving the identity of a customer, you can use various methods of verification depending on your business needs. 

• Credit bureau-based authentication: Financial institutions use this method to verify customers, cross-referencing their information with the data available from credit bureaus. 

• Database methods: Database ID verification cross-references an individual’s identity against various government records for an easy and efficient solution.

• Document-based verification: Sectors that require strict KYC conformity often use this solution, which involves verifying customers with physical documents like passports and driver's licences. 

The Importance of Identity Verification

Identity verification is an essential step in the AML process, therefore, it is utterly paramount in the fight against economic crime and terrorist financing. But, not only are identity verification checks important in the grand scheme of financial stability, but putting in place a sturdy AML approach will demonstrate that you’re a trustworthy organisation that cares about the trust of your customers and the security of their data. 

When Would You Use Identity Verification?

Identity verification checks are an essential step in the Know Your Customer (KYC) and CDD process. Often the very first step of the onboarding and CDD procedure, it’s normal to request personal data from new clients, including their name, date of birth, address and at least one document that can be used as proof of identity. 

What is Identity Authentication?

They may sound incredibly similar, but identity verification and identity authentication are actually two very distinct steps in a company’s AML due diligence process. Simply put, while verification establishes the existence of an individual, authentication makes sure that an individual accessing a system or platform is the same verified individual and not a fraudulent person. 

The Methods of Authentication

Identity authentication can be established in several ways, providing comprehensive security measures against possible financial criminals. The extent of this authentication can be tailored on a case-by-case basis, with different organisations requiring different levels of authentication. Methods of identity authentication include:

• Biometric authentication: This solution uses facial recognition, retina scan or fingerprint validation of the customer, which they must use upon entering back into the platform. 

• Knowledge-based authentication: This process asks customers to enter specific login details when requesting access to sensitive documentation – it’s often seen as the simplest authentication technique. 

• Two-factor authentication: This method forces customers through two stages of verification before access is granted – this often involves login details first, followed by verification through an SMS code.

The Importance of Identity Authentication

While identity verification is crucial to the onboarding of new customers and for your company’s legal obligations to AML requirements, authentication of individuals is equally important for ongoing monitoring purposes. Indeed, authentication is arguably even more crucial, safeguarding the future of your organisation from financial crime with a process that asks for repeated proof of identity 

When Would You Use Identity Authentication?

As discussed, identity authentication is a process you conduct throughout the lifecycle of a customer. While identity verification is one of the very first steps of the CDD and onboarding processes, authentication should happen every time a customer interacts with your system. The procedure is, therefore, part of your ongoing security and transaction monitoring obligations.  

How Does Identity Verification Differ From Identity Authentication?

As we have discussed so far in this blog, identity verification and authentication differ greatly from one another, with the former referencing how the identity of customers is established and the latter being used to prove this identity on an ongoing basis. But to simplify the difference between the two solutions, study our simple table below. 

How SmartSearch Can Streamline Your Process

At SmartSearch, we make fulfilling your AML responsibilities as easy as possible, simplifying how you verify and authenticate the identity of your customers through a variety of innovative tools. 

Want to improve your identity verification and authentication processes? With SmartSearch, you can enjoy:

• Document Verification: Our document verification solution is award-winning, utilising Optical Character Recognition (OCR) software to verify text. 

• Triple Check: Our robust, 3-tiered Triple Check solution verifies and screens customers, uses facial recognition software and finally carries out a digital fraud check to give you a comprehensive AML solution. 

• Fraud Prevention: Stay secure around the clock with our fraud prevention service that scans data sources constantly to identify any suspicious activity and keep the identity of users safe. 

To discover how our AML and compliance platform can elevate your business, book a free demo with us today or contact us now for more information about our services!