Top 10 red flags when verifying a client’s identity
Verifying a client’s identity is a critical process for regulated firms to ensure trust, security, and compliance with regulatory requirements. However, it is not without it’s challenges.
I’ve listed some common red flags in no particular order, which may indicate potential issues when conducting due diligence. These warning signs should prompt firms to conduct further investigations to mitigate potential risks and prevent fraud. Identifying and addressing these red flags proactively can help prevent crime and prevent fines issued by regulators.
1. Inconsistent or Altered Documents
One of the primary red flags during client verification is the presence of inconsistent or altered documentation. This could include discrepancies in the client’s name, address, or other identifying information across different documents.
It might also involve signs of tampering, such as erasures, corrections, or mismatched fonts and styles. Such irregularities should raise suspicions and warrant additional scrutiny, as they may indicate attempts to misrepresent or even impersonate an identity.
