Score Based Compliance Solutions the New Standard?

Over the past few weeks and months, I have been hearing more and more about our clients and prospects asking for score-based compliance solutions. While this may seem logical, it has not and is not the norm.

Historically speaking – the lion’s share of financial services companies have deployed your traditional ID Verification solutions to meet BSA and CIP compliance requirements. What I mean is that they have deployed solutions to essentially “match” the identifying elements for a new customer application. Eg. “Did the social match?”, “Did the address match?”, etc…. In addition – these solutions also look for additional things like “Are they on the OFAC list”. Based on these matches and data – this then allows the institution to take action per their compliance program.

While I think most would agree that these steps and measures will most likely get companies in compliance – you can quickly see how it is not fool-proof from preventing identity theft and fraud. Eg. a fraudster that establishes a completely new identity. A fraudster that first opens up a phone number at a new address in the victims name – where upon they will then be “matched at address”. Or, the fraudster that fraudulently changes the address at the post-office. In these cases, the transactions will “pass”, as we have verified the information.

Similarly – the majority of “non-matches” are not fraud – but good legitimate consumers. Together – we can see the dilemma – verified customera are fraud and unverified customers are good.

That is why scoring makes so much sense. Why? Because all of the information used in the decision is just that – information. It is not the truth – merely a measure of the truth. By scoring, we are able to look at all of the information and create the most optimal measure of the truth. This will lead to smarter decisions, lower amounts of fraud, and the most reasonable compliance program available.

I suspect that this drumbeat around scoring based compliance solutions will only get louder.


Date Posted: January 15, 2009 Author: Category:   IDI Blog

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