Global financial institutions face a growing need to “know” – identify and authenticate – their clients to prevent loss of money, terrorist financing, money laundering and tax evasion. Failure to properly identify the institutions’ customers can result in financial losses, fines and poor publicity.
Current ID verification practices at financial institutions
Financial institutions typically verify the ID of the following types of transactions:
- account Opening: The Patriot action initially required the institutions to keep a copy of the ID provided at the time of opening the account. This was then reduced to requiring only registration of key information proving that ID was verified (e.g. driver license number). While listing the ID number may be sufficient, a simple geographical error, such as number transposing, may invalidate the ID verification evidence. Catching the ID card during account opening confirms that the ID has been verified and opens the door for better subsequent interaction with the customer. Options include: a) Adding the photo ID to a bank issued debit or credit card without the need for photo capture equipment. Small photo IDs are used by storage clubs in combined member / credit card applications. b) Display of ID / photo, personal attributes and signature to the narrator during a transaction to reduce ID fraud.
- Routine Transactions: Machine-readable identification cards (ID cards, credit / debit cards / ATM cards) can be used to identify a customer. The teller application can pre-populate customer information to speed up the transaction and create a more comfortable customer experience.
- Cash withdrawals: ID cards are typically required for a cash withdrawal from a customer in a branch, unless the withdrawal occurs in the customer’s home bank and the customer is personally known by the bank’s employee.
- Major transactions: Financial institutions typically require multiple pieces of identity for transactions over a certain amount threshold, including transfers and deposits. This is necessary because losses can occur on large deposits (such as cash repayments) where the deposit is a forgery but is only recorded when the amount was withdrawn.
- Check the discard: A recent FDIC survey (1) found that 7.7% of US households are unpublished, and over a quarter – 25.6 percent – of all households either do not have a checking or savings account or have a bank account, but still choose to rely regularly on “alternative financial services” such as payroll providers and pawn shops. Serving these clients can be profitable, especially in a tough economy, but requires solutions to positively identify someone who is not a customer of the financial institution. Today, this business is largely handled by checkout stores, pawnbrokers, but is increasingly considered an opportunity to bring customers into stores (such as convenience stores and gas stations) by offering checkout services. In checkbox applications, the ID card is required for initial office registration and for subsequent checkout transactions.
- Government Regulations: ID verification is required for any financial transaction that may require public reporting, e.g. In the US cash transactions over $ 10,000. In countries with foreign exchange rules, transactions must be reported with government ID number. Most currency windows require a valid ID.
The evolution of identification documents
After 9/11, it has become clear that the authorities issued by the state (passports, national ID cards, driver’s licenses) were not adequately protected against counterfeiting. Commission of 11. September recommended that the U.S. improve its identification document issuance system and urge the federal government to set standards for issuing sources of identification.
For international travel, the International Civil Aviation Organization (ICAO) issues a standard for biometric passports, or e-passport. E-passports include biometric information about the passport holder on a secure chip. Public key infrastructure is used to authenticate the data stored on the passport chip. The United States (2) and most EU countries have adopted e-passports for all newly issued passports.
Passports are only required for international travel and are not typically used as ID in domestic commercial transactions where they are issued driver cards are the primary identification documents.
The design of state driving licenses has typically been unsafe and very easy to forge. The easy accessibility of counterfeit state ID documents creates a problem of ID theft and enforcement of liquor sale restrictions.
In 2005, President Bush signed the proper ID – “Improved Driving License and Personal Identification Cards” (3). Real ID has been controversial, with several states calling for repeal and replacement with the proposed PASS ID action. As of January 2011, the Department of Homeland Security issued an exemption from the deadline, but states must be in full compliance by May 2011.
In addition to Real ID, Michigan, New York, Vermont and Washington issue Extended Driver’s License (EDL) (4). EDLs provide proof of identity and U.S. citizenship, is issued through a secure process and includes technology that makes travel easier. EDLs are an alternative document to comply with Western Hemisphere Travel Initiative (WHTI) travel rules for entry into the United States from Canada, Mexico or the Caribbean through a land or sea port, in addition to serving as a permit to drive. Michigan, New York, Vermont and Washington issue WHTI compliant documents.
Despite the opposition to REAL ID, most states implement new driver’s licenses and state ID cards that include enhanced security features:
- Magnetic stripes – magnetic tape has been the main method of storing information on a credit / debit card / ID card. They are not very secure, but are usually preserved for compatibility with a large installed base of equipment.
- 2-D barcodes. EDLs require a machine-readable zone (MRZ) or bar code as a backup for RFID. Many states adopt 2-D barcodes in basic driving licenses. 2-D barcodes used in driver cards in Ohio and Georgia can store more data and data can be protected with encryption or digital signatures.
- Radio Frequency Identification Chips (RFID). RFID is used for enhanced driver’s licenses and Trusted Traveler programs (NEXUS, SENTRI and FAST).
- Ultra Violet Zones. UV zones contain invisible symbols that glow only in the presence of UV light. This is difficult for counterfeiters to copy.
- Microprint. Driving license microprints prevent forgery. As with banknotes, microprints can be recognized with magnifying glass and high-resolution imagers, making counterfeiting more difficult.
- Color and location of holder photo. As with banknotes, color patterns and location are used to determine forgeries.
Applications of ID card mapping
The availability of scanners and software to capture ID cards magnetic stripes and images opens up two levels of utilization of the ID card images:
Archiving ID card images provides clear evidence that ID cards were presented. As mentioned earlier, they can provide levels of ID theft protection by displaying photos of the ID holder. Even a simple application of recognition technologies (comparing information from short text, magnetic stripe and bar code) will detect many common forgeries. Storing front / back photos of ID cards provides evidence that the bank employee complied with the Patriot Act, obtaining ID for a new account holder.
approval takes the ID verification to the next level. Authentication solutions offer an automated approach to ID verification, alerting the user to potential risk factors, forgeries and expired ID cards.
Advanced ID detection systems (see example: advancediddetection.com) typically include a color / high resolution scanner combined with authentic ID card software. ID authentication solutions
- Scan ID in high resolution color
- Read barcodes and magnetic stripe data
- Confirm infrared patterns
- Cross-check information in clear text, barcode and magnetic stripes
- Warning if the ID card has expired, someone is of legal age, etc.
For example, automated authentication systems are used in liquor stores and restaurants to avoid sales to minors. It is interesting to note that the Transportation Security Administration (TSA) has not implemented wide-scale automated authentication. TSA has accepted bids on systems, but so far has limited ID approval for office training and handheld UV light.
Application of ID scanning / archive and approval in financial institutions
Most counters in financial institutions are equipped with a validation / receipt printer, a PC, monitor and keyboard. More advanced institutions use cash dispensers, cash recyclers, coin users and signature / PIN pillows.
Verify that image capture has largely shifted from centralized proofreading / reader / sorting operation to branch recording. A majority of financial institutions have implemented branch admission (est. 68% of branches) in the back. Back-office reception eliminates “prime pass” but does not remove most of the back-office control processing tasks. It offers few opportunities for fraud prevention – by the time the item is caught, the person will have left the branch.
Fewer, but more technologically advanced institutions, have implemented control capture at the counter. Implementation of counter trapping is growing rapidly in 2010/2011, with many major regional institutions adopting counter trapping.
Unfortunately, current counter scanners are not suitable for ID capture and even less for ID authentication
- First generation check scanners were oriented to the “lowest common denominator”, 200 dpi two tonal images, which may be sufficient to exchange check images but not well suited for IDs.
- The installed device bases have an U-track design that cannot process rigid subjects such as IDs.
Teller scanners are designed for a five-year life cycle, but with decreasing control volumes will last 7-10 years or longer. Therefore, it is important for the industry to ensure that the next-generation teller scanner is more versatile to protect the significant investment required to implement teller capture.
The currently available freestanding ID authentication solutions are not suitable for branch banking because
- ID authentication solutions are not integrated with other banking applications
- Standalone ID authentication solutions are expensive and will consume valuable counter workspace.
It makes much more sense to use counter-check scanners for ID capture. To enable future ID scan / authentication applications, an appropriate counter scanner must offer
- A straight track for rigid ID cards. Since limited footprint and the need for 100-item jumps and stacks require an un-shaped design, ID cards must be scanned using a “by-pass feeder” that enters still images after the turn but before front / rear cameras.
- A resolution of at least 300 dpi with 256 gray-level image capture.
- An integrated magnetic strip reader.
The next generation of check-scanning devices allows institutions to capture ID images
- Filing of evidence that the institution validated ID
- Automatically capture customer information (name, address, age, gender) for opening new accounts or future marketing of unbanked / competitor prospects.
- Additional logon security by authenticating the counter using the counter employee’s ID card.
- Faster counter service by automatically opening the customer account when an ID or credit / debit card is identified – without an additional PC peripheral. This is often used in counter transactions in international banks.
- Recoding ID images to display on counter workstations to prevent stolen ID retraction
- An authentication level supported by 300 dpi grayscale images, such as decoding 2-D barcodes and matching ID card and account data with barcodes and magnetic stripe information
- Potentially adding ID images to bank-issued debit cards / ATM cards, a practice used by combined membership / credit card storage clubs, without additional photo equipment.
Use of ID scan / archive and approval in alternative financial service channels
Alternative financial services channels provide services that are mostly targeted to the non-banked / underbanked population. Alternative financial services are provided by pawn brokers, check cashiers, payday lenders, gas station stores, casinos, convenience stores and even prisons. A recent Wall Street Journal article (5) ] lamented that the Credit Card Act (2009 – Card Liability and Disclosure) of 2009 “pushed more Americans out of the banking system” in the name of consumer protection.
Many alternative financial transactions are conducted at financial self-service kiosks. Kiosk integrator manufactures devices with a wide range of features: ID card readers, debit / credit card readers, check acceptors, cash dispensers and acceptors, cameras and even mail order and storage value card printers.
As these customers typically do not use a bank card such as ID or debit card, the driver’s license becomes the primary identification tool. The following is an example of an application implemented in grocery stores in a gas station chain with the CTS SB50E module in a self-service kiosk:
- The customer registers by inserting the driver’s license. The ID is scanned, stored, approved by software and returned to the customer.
- The customer is registered using information from ID (clear text, magnetic stripe and bar code).
- The customer feeds in the check.
- Customer ID and photo / video are used for authentication by a human operator at a central location. The operator accepts the check and it is approved, stamped and stored in the unit or rejected and returned to the customer.
- The kiosk provides cash, a stored value card or money order (minus a commission).
Financial self-service kiosks are funded by transaction fees, but are often distributed as a marketing tool to bring customers into the convenience store.
Future technological advances – UV and color imaging
While color images are standard in most imaging applications, they have not been widely used in American control processing. But in international banking, the use of color image and UV is growing rapidly.
Asian applications require higher resolution color images to authenticate “chops” seals that act as signatures.
- Central banks in India (6) and Latin America establish control standards that include UV zones to prevent fraud. The new Reserve Bank of India Check Truncation System CTS-2010 (7) includes the use of watermarking and printing of bank logos visible only with ultraviolet images.
As a result, we will see advances in scanner technology, including UV and color image capture for control capture and approval. Color / UV imaging offers the opportunity to further enhance the strength of ID authentication.
1)]FDIC National Household Survey
2) Bureau of Consular Affairs, U.S. state Department
3) US Department of Homeland Security – True ID final rule
4) Improved Driver’s License for US Customs and Border Protection
5) Wall Street Journal, January 4, 2011, Todd Zywicki, Dodd-Frank and Return of the Loan Shark
7) Reserve Bank of India CTS 2010 Standard for Control Forms – Specifications