Protecting govt from fraud with digital ID verification

As today’s digital landscape continues to evolve, the issues involved with the handling of customer data are becoming increasingly important for the public and private sectors. The recent breach involving the Office of the Australian Information Commissioner highlights that even Australia’s peak privacy body is vulnerable to cyber attacks that can result in a loss of customer trust and confidence.

Government departments run the risk of significant financial and reputational harm if they don’t strike the right balance between using customer data for operational purposes and respecting individuals’ privacy rights. The stakes are high and the regulatory landscape is changing quickly, so fraud protection and detection should be front of mind for all government boards and committees.

The recent decision by the Australian Prudential Regulation Authority (APRA) to force Medibank to hold an additional $250 million in capital from July as punishment for the health insurer’s data breach last year demonstrates the seriousness of the risks organisations face. The extra capital will remain in place until Medibank can complete a more detailed remediation plan. APRA will also “conduct a targeted technology review” to ensure the company’s systems are up to standard.

In another regulatory area, the Australian Government will most likely expand the anti-money laundering/counter-terrorist financing regime over the next 12–18 months after the consultation period for the regulation closed on 16 June 2023. In the May Budget it committed $14.3 million over four years from 2023–24 to support the necessary policy and legislative reforms to disrupt financial processes used by criminals.

Meanwhile, AUSTRAC continues taking enforcement action against non-compliance with Australia’s existing AML/CTF laws. While there has been a focus on the banks, with very public and notable fines such as the $700 million issued to Commonwealth Bank of Australia, AUSTRAC has turned its attention to the gambling industry, and in particular casinos, with further fines being levied on a number of the major players.

The breaches arose due to their failure to ensure that a risk-based approach was adequately and proportionately implemented. The reforms will be designed so that organisations can better understand what steps are needed to mitigate risks by improving their understanding of the nature and extent of the risks they face.

Tranche 2 reforms will also see an expansion of the AML/CTF regime to cover gatekeeper professions, including lawyers, accountants, trust and company service providers, and real estate agents. The next round of consultation and draft legislation is expected in September 2023, and I expect to see an increase in the regulatory and reporting requirements.

Mitigating risk through identity fraud prevention

No-one wants to spend hours trying to prove who they are, and we also want to know we’re protected against identity theft and fraud. The good news is the technologies exist to build intelligent tools that protect users from identity fraud, while enabling a seamless user experience. Digital ID verification can remove the burden of identity checks for organisation so they can focus on scaling their business without the compliance and operational overheads.

These technologies can be combined in one user-centric experience, including identity document optical character recognition (OCR), document authentication, liveness detection and biometric face matching.

The AML/CTF rules support flexible KYC (know your customer) processes and procedures. Ways that you can verify your customers’ identity and fulfil your KYC requirements include using electronic copies (scans or photographs) of reliable and independent documentation to verify the identity of individual customers. They also allow a customer to provide a clear, front-view ‘selfie’ of themselves that can be compared with the scanned or photographed copies of identification documents.

Biometric identity verification technology

Biometric ID verification solutions can provide government organisations with the confidence a person is who they say they are. These solutions leverage new technologies like Computer Vision, a field of artificial intelligence (AI) that enables computers and systems to derive meaningful information from digital images, videos and other visual input that are underpinned by neural networks.

Biometric identity verification is achieved through a layered approach that prevents fraud and other criminal attacks by:

• Document authentication — is the ID being presented genuine?
• Liveness assurance — are you a real person?
• Biometric face matching — are you the right person?
• Real time — is the transaction happening right now?
   

The flexibility of these solutions means that they can connect to any data verification source and meet KYC requirements. In addition, the technology can help organisations move to implementing perpetual KYC (pKYC). This is the practice of maintaining accurate client data, through updates based on changes in clients’ behaviours and circumstances in near real time. This means that the solution adapts to evolving security threats and compliance requirements.

In conclusion, digital ID verification enables users to verify their identity quickly and easily, and access essential services like banking and government benefits. The expected new regulations will bring in guidelines for KYC that will herald a new phase of the digital age, and public and private organisations need to be ready to meet regulatory compliance, prevent fraud and better serve their customers.

Image credit: iStock.com/Iaremenko