Skip to content
Log InGet Started
KYC Best Practices09 Jul 2024

Complete Guide To Effective Identity Verification in 2024

Gift Arku

Marketing Associate

Identity verification is a critical process that allows organisations to confirm an individual's identity to grant access, approve applications, or complete transactions. Organisations risk fraud, theft, and non-compliance with regulations without proper identity verification. 

Effective identity verification within an organisation depends on four core principles: accuracy, reliability, security, and user-friendliness. To achieve this, it is essential to use multiple reliable sources for confirmation, implement strict security protocols, and prioritise user convenience while following the rules.

This article will discuss the core principles of adequate identity verification. You will also learn how it works and the best identity verification methods to suit your business.

Key Takeaways

  • Accurate and reliable identity verification protects your organisation from fraud, theft, and non-compliance.
  • Implementing robust identity verification systems is crucial to building consumer trust and growing your business.
  • Effective identity verification processes are built on four core principles: accuracy, reliability, security, and user-friendliness.
  • Various identity verification methods are available to you, including document verification, biometric verification, knowledge-based verification, and two-factor authentication (2FA).
  • It is essential to regularly review your identity verification processes to ensure they are effective and compliant with relevant regulations.

What is Identity Verification?

Identity verification is collecting, validating, and confirming personal data and documentation an individual provides to establish their identity. This process involves verifying information such as names, addresses, dates of birth, and government ID numbers to ensure that individuals do not submit false information on applications or when opening accounts.

The specific method and identity verification process may vary depending on your business model. However, all forms of identity verification strive to compare the information the user provides with verified datasets to verify the authenticity of their profile.

For instance, users may be asked to provide their name, address, date of birth, Social Security number, etc.

An effective identity verification process involves comparing this information against datasets such as government-issued IDs or third-party databases to confirm the person's identity.

Identity verification works by using signals to compare these data. They include 

Active signals 

Provided by the user,

Passive signals 

Provided by the user’s device, and

Behavioural signals

Provided by how the user interacts with the online application or platform.

Third-party data

The government database, private businesses, and other issuing databases provide it.

How Does Identity Verification Work?

At its core, identity verification is the process of ensuring that an individual is who they claim to be. This process typically involves checking identity information against trusted sources and using various methods to confirm the authenticity of the person. Here’s a breakdown of the primary components:

a. Data Collection

  • Personal Information: This includes the collection of basic personal information such as name, date of birth, and address. Often, this information is provided by the user during registration or application processes.
  • Documents: Documents such as passports, driver’s licenses, and national ID cards are commonly used for verification. These documents contain essential data and security features that can be checked against databases and standards.

b. Document Verification

  • Optical Character Recognition (OCR): Advanced OCR technology scans and extracts text from identity documents. This extracted information is then compared with the data provided by the user.
  • Security Features: Documents have various security features like holograms, watermarks, and barcodes. Verification systems check these features to ensure the document is genuine.

c. Biometric Verification

  • Facial Recognition: This method involves comparing the user’s live photo or video with the photo on their ID document. Facial recognition technology ensures that the person presenting the ID is its rightful owner.
  • Fingerprint Scanning: Fingerprints are unique to each individual. This method captures and compares fingerprints against existing records.
  • Voice Recognition: Voice recognition systems analyze the user’s voice patterns and match them against pre-recorded samples.

d. Database Checks

  • Government Databases: Verification systems cross-check the provided information and documents against government databases. This step is crucial for confirming the authenticity of IDs and detecting any fraudulent activity.
  • Watchlists: For added security, identity verification processes often include checks against global watchlists, such as those maintained for anti-money laundering (AML) and counter-terrorism purposes.

e. Behavioural Analysis

  • User Behavior: Behavioral biometrics analyze how a user interacts with a system, such as typing speed, mouse movements, and touchscreen behaviour. These patterns help in identifying and verifying the user.
  • Transaction Monitoring: Monitoring user transactions over time can reveal patterns that indicate whether the user is who they claim to be.

The Importance of Identity Verification

Identity verification is vital for various reasons:

  • Security: It protects against identity theft and fraud, ensuring that only authorised individuals can access certain services and information.
  • Regulatory Compliance: Many industries, especially finance and healthcare, have strict regulations regarding identity verification. Compliance with these regulations is essential to avoid legal repercussions.
  • Trust and Credibility: For businesses, verifying the identity of customers fosters trust and credibility. Customers are more likely to engage with services that prioritise security.
  • Efficiency: Automated identity verification processes speed up onboarding and reduce the need for manual checks, improving the overall user experience.

7 Pillars of Effective Identity Verification

Adequate identity verification is crucial for security and trust in various industries, from financial services to online platforms. Here are the core principles that constitute an effective identity verification solution:

1. Accuracy

Verification processes should be accurate and reliable. This includes using multiple data sources and validation methods to ensure the claimed identity is legitimate.

2. Multi-factor authentication (MFA)

To enhance security, it's advisable to use a multi-factor verification approach that combines something the user knows (such as a password or PIN),' something the user possesses (like a smartphone or security token), and something the user inherently is' (for instance, biometric identifiers like fingerprints or facial recognition). This approach increases the difficulty for unauthorised individuals to gain access.

3. Data privacy and security:

Protect the personal information used for verification. In creating an identity verification system, you must implement robust data security measures, such as encryption and secure storage, to prevent data breaches.

4. Risk-based assessment:

Risk-based assessment involves evaluating the level of risk associated with a user or transaction and then applying the appropriate verification scrutiny based on that assessment.

The critical aspect of risk-based assessment is its dynamic nature. Instead of using a one-size-fits-all solution, it customises the verification process according to the identified level of risk. This means simple verification methods suffice for low-risk scenarios, while high-risk situations require more stringent measures such as multi-factor authentication or manual review processes.

5. User experience

User experience (UX) in identity verification involves designing a smooth and user-friendly process while maintaining necessary security standards. UX is a core principle because it directly impacts how users perceive and engage with the verification process and the service or platform implementation.

A well-designed UX for identity verification ensures that complex or time-consuming procedures do not deter legitimate users. It minimises friction by reducing the steps required for verification or ensuring that instructions are clear and easy to follow. This is crucial because a negative experience can result in abandoned transactions, decreased customer satisfaction, and potential harm to the business's reputation.

 6. Regulatory compliance

No matter the identity verification procedure you put in place for your users, it has to adhere to relevant data protection and privacy regulations, such as GDPR or HIPAA, and industry-specific requirements like KYC (Know Your Customer) and AML regulations.

7. Scalability:

Build security systems that can scale to accommodate growing user bases without compromising security or efficiency.

Future Trends in Identity Verification

The field of identity verification is continually evolving, driven by advancements in technology. Some emerging trends include:

  • Artificial Intelligence (AI): AI enhances the accuracy and efficiency of identity verification processes. Machine learning algorithms can detect fraudulent patterns and adapt to new threats.
  • Blockchain Technology: Blockchain offers secure and transparent ways to manage and verify identities, reducing the risk of data breaches and tampering.
  • Multi-Factor Authentication (MFA): Combining multiple verification methods, such as biometrics and passwords, provides a higher level of security.
  • Decentralised Identity: This concept allows individuals to control their own identity data, granting access to specific parties as needed, rather than relying on centralised databases. 

9 Steps to Establishing an Effective Identity Verification System

Identity verification typically involves confirming that the person claiming to be a particular user is indeed that person.

Every business has a customised workflow to verify a user’s identity, but here’s a general procedure that can help you achieve your KYC obligations:

Step 1: Define your verification requirements:

Clearly define the level of identity verification needed based on the nature of your platform or service. Consider the sensitivity of the information involved and the regulatory requirements in your industry.

Step 2: Choose an identity verification method:

As mentioned earlier, there are various methods for identity verification, including:

  • Document verification: Verify official documents such as government-issued IDs, passports, or driver's licences.
  • Biometric authentication: Use biometric data like fingerprints, facial recognition, or voice recognition.
  • Knowledge-based verification: Ask the user to answer security questions or provide specific personal information.
  • Two-factor authentication (2FA): Use a combination of two verification methods, such as a password and a temporary code sent to the user's phone.

Step 3: Integrate identity verification tools or services:

Select and integrate identity verification tools or services that align with your chosen verification method.

Some companies specialise in providing APIs and SDKs for seamless integration. At Smile ID, we have built some of the best verification tools, especially for African-focused businesses.

From image capture optimisation for lower-end smartphones to local knowledge of African ID documents, SmileID’s solution was built to consider the needs of African users. Book a free demo to learn more today.

Step 4: Capture user information:

Next, you should capture the necessary information for verification. This may include personal details, documents, or biometric data.

Step 5: Document verification:

If using document verification, prompt the user to upload a scanned copy or a clear photo of their official ID. Use optical character recognition (OCR) technology to extract information from the document.

Thankfully, SmileID allows you to store accurate customer information without the mistakes of manual entry. Its OCR technology transcribes text from ID document photos with 96% accuracy. Book a free demo to see how it works.

Step 6: Biometric verification:

If using biometric verification, guide the user through capturing their biometric data, such as fingerprints or facial features. Use this data for comparison during subsequent logins.

Ask the user to answer security questions or provide specific information that only the legitimate user would know. Ensure the questions are not easily guessable or publicly available.

Step 7: Two-factor authentication:

Implement 2FA to add a layer of security. This could involve sending a temporary code to the user's registered email or mobile device.

Step 8: Verification process:

Create a verification process that guides users through the chosen method(s). Communicate the steps involved and assist if needed.

Step 9: Review and monitor:

Regularly review your identity verification process for effectiveness. Monitor for any suspicious activities and update your verification methods as needed.

Pro Tips: 

  • Ensure your identity verification process complies with relevant data protection and privacy regulations, such as GDPR or HIPAA.
  • Remember, the specific steps and tools you choose will depend on the nature of your business, the regulatory environment, and the level of security required.
  • Always prioritise user privacy and ensure your identity verification process is transparent and user-friendly.

What Should Trigger an Alert During Identity Verification?

The primary purpose of conducting identity verification is to comply with AML regulations.

So you should have these factors in mind and incorporate them into your verification process to help fish out risks sooner:

a. Politically Exposed Persons (PEPs):

PEPs are individuals who are or have been entrusted with prominent public functions. This includes government officials, high-ranking military officers, senior executives of state-owned enterprises, and high-level officials in political parties.


  • PEPs pose a higher risk of corruption and involvement in money laundering due to their positions of influence and access to public resources.

Red flags:

  • Sudden wealth or financial transactions inconsistent with their known income
  • Unexplained or immense transactions
  • Complex ownership structures or transactions involving family members.

b. Adverse media

Adverse media refers to unfavourable information about an individual or entity publicly available through media sources. This can include news articles, legal records, and other sources of information.

Risk: Adverse media can indicate involvement in criminal activities, financial irregularities, or connections to sanctioned entities. 

Red Flags:

  • Presence in news articles about unlawful activities, fraud, or corruption.
  • Legal issues, such as involvement in lawsuits or regulatory actions.
  • Association with individuals or entities under sanctions.

c. Unusual behaviour:

Are there rapid or frequent changes in account information? Has the user had multiple failed login attempts or password reset requests? 

These unusual behaviours should raise red flags. Also, unexpected changes in user behaviour, such as sudden large transactions or access from unique locations, are among the indicators for closer scrutiny.

How to Automate your Customer Identity Verification Process with Smile ID

Generally, Smile IDs solution empowers businesses to conduct KYC tailored to their specific needs. The KYC process includes: 

Step 1: Identity Verification

Smile ID offers an array of identity verification solutions to help businesses meet their KYC compliance needs. This includes: 

  • Document Verification: empowers businesses to verify 8500+ identity documents across 226 countries globally using biometric authentication and OCR technology. Our solution boasts 100% coverage across all African countries with at least 3 ID types covered.
  • Government KYC Checks: leverage direct access to databases from ID issuing authorities across Africa to verify customer identity. 
  • Enhanced Document Verification: Combine the functionality of Document Verification and Government KYC checks in one robust solution for a more detailed compliance check.

Step 2: AML Check

Take extra precautions by running an AML check on the customer against PEP, Sanctions, and watchlists.

The technology uses optical character recognition (OCR) to transcribe text from ID document photos with 96% accuracy, eliminating manual data entry errors. 

It matches the picture on the document with the user-provided selfie to prove document ownership. Authenticity checks look for official ID document features like watermarks and barcodes. All verifications are backed by real-time human review within three minutes.

Businesses can perform this via our no-code platform or API/ SDK integration. Book a free demo today to learn more.

Final Thoughts

In conclusion, adequate identity verification is crucial for business success, ensuring security and compliance while building user trust. A key lesson from studying comprehensive identity verification strategies is balancing robust security measures with a seamless user experience. 

Technologies such as OCR and facial recognition have transformed the verification process by providing high accuracy and real-time results. 

Your business must adopt these advanced solutions to stay ahead in combating identity fraud and streamlining customer onboarding. By integrating these techniques, you can confidently onboard legitimate customers while deterring fraudulent activities.

Smile ID solutions are designed to provide you with comprehensive AML and KYC coverage in 54+ countries across Africa. Our APIs and SDKs are designed for easy integration and interaction with your existing infrastructure. Book a free demo today to learn more.

Ready to get started?

We are equipped to help you level up your KYC/AML compliance stack. Our team is ready to understand your needs, answer questions, and set up your account.