Age Verification Can Save You From Online Scams in the Banking Sector


Innovations within existing technologies have allowed consumers to reap the benefits of artificial intelligence. This has especially been the case during the ongoing COVID-19 pandemic. However, consumers also faced significant challenges across the virtual spectrum, which particularly includes the banking and financial sector.

The expansion in the scale of operations of the banking industry has necessitated the establishment of a robust virtual presence that requires knowing the customer. In simpler words, an age verification process is needed to delegate the customer with the same level of authority that is demanded by banks for carrying out legitimate transactions. This is because consumers are at a greater risk of identity theft and banks have no idea if they’re dealing with authentic customers or not.

What is meant by Know Your Customer (KYC)?

Transparency is indispensable to the establishment of profitable relationships between financial institutions and their customers. Such a relationship is facilitated through the procedure of knowing your customer (KYC). For that matter, KYC is said to be the process of acquiring and cross-referencing a customer’s identity against independent and authoritative sources to protect an entity against various risky customer-profiles. KYC falls under the wider scope of Anti-Money Laundering (AML) which is concerned with the prevention of large-scale financial fraud such as money-laundering and terror-financing.

Roadmap to a complete KYC Process

A typical KYC process includes but is not limited to:

  1. Verification of a potential customer’s identity to prevent multi-faceted frauds.
  2. Screening the customer against AML datasets such as prohibited and sanction lists.
  3. Evaluation of customer risk profiles to determine if they are high-risk prospects or not.
  4. Ongoing AML, that includes real-time monitoring to observe changes in risk profiles.

KYC ensures Customer Due Diligence (CDD)

Although, Customer Due Diligence (CDD) and KYC are terms often used interchangeably, technically, the former is just one aspect of the latter. The starting point for any financial institution in the onboarding of a customer is by evaluating whether a potential client can be trusted or not. It is imperative to ensure that the client is anyone but a criminal, terrorist or a Politically Exposed Person (PEP) who might present a risk.

There are three different levels of CDD depending upon the risk-profile of the customer:

  1. Simplified Due Diligence (SDD) concerns the least risky situations in which the risk of money-laundering or terror-financing is quite low.
  2. Basic Customer Due Diligence (CDD) refers to the acquisition of necessary credentials from the customer to validate identity. This aids in assessment of that user’s risk profile.
  3. Enhanced Due Diligence (EDD) is the stringent of all in which additional information is collected if a customer is deemed to be a high-risk customer. This ensures a deeper investigation of a customer’s activity to mitigate associated risks and decide whether that high-risk customer is worth onboarding or not.

The role of Age Verification in EDD

An essential step to include in a customer due diligence program is ascertaining the age of the potential customer. Age verification allows businesses to validate the age of their customers in order to safeguard minors from committing identity fraud. This also means that businesses are able to monitor and keep themselves from transacting with minors that might be presenting themselves as adults. Customers are asked to provide their personal information on an online custom form. Through the use of Optical Character Recognition (OCR) technology, details are extracted from the form and verified with the provided information allowing accurate age verification.     

Age Verification as a barrier against Online Fraud

The 2020 Internet Crime Report compiled by the FBI’s Internet Crime Complaint Center (IC3), reported approximately 800,000 complaints of suspected internet crime in 2020, with financial losses amounting to more than $4.2 billion.

1. Synthetic Identity Fraud

One of the most prevalent types of fraud happening this year has been termed by Justin Nabity, a financial planner, as “synthetic identity fraud”. “It is like identity theft fraud, but in this type of fraud some information is stolen from an individual and some information is fictional,” says Nabity. For example, the name of the user may be fictional but another element of identity such as age is stolen in order to get clearance from an organisation. The fabricated details are then used to open sham accounts for the purpose of carrying out fraudulent transactions. In this case, the use of age is detrimental to the user.

2. COVID-19 Relief Scams

With the irregular disbursement of stimulus payments by governments as part of COVID-19 relief programs, scammers have found a new avenue to elicit money from people in unimaginable ways. Howard Dvorkin, a CPA, has reiterated that the most common scams of the year have actually involved embezzlement of stimulus payments. Scammers lied about offering ‘COVID relief grants’ in addition to stimulus checks in return for personal information from which every bit of data such as age would be sold to fraudsters who would run up credit cards and raid bank accounts.

3. Fabricated Social Accounts

It goes without saying that social networking platforms are highly flooded with fabricated accounts. Facebook Inc. said on March 22, 2021 that it had taken down 1.3 billion fake accounts in the last quarter of 2020 by employing over 35,000 employees to tackle fraud on its platform.

Businesses may create fake pages and lead minors into believing that they are communicating with authentic entities. Minors are also vulnerable to fraud that takes place on dating sites as stringent age checks do not exist on such platforms. To protect minors from the temptation of such age-restricted sites, age verification solutions needs to be implemented.


Negligence in the safekeeping of sensitive information like age, address, and social security number is a cardinal sin on behalf of the user. On the other hand, the liability of not equipping payment platforms with appropriate age verification trends falls on the financial institutions.

Both parties need to make sure that they exercise due diligence if they are to establish a successful commercial relationship, otherwise either one of them may face financial and emotional damages from the resulting fraudulent transactions.

Martin Shaw Hacker Noon profile picture


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