KYC AML Guide: the Clock shows the average reeding time of the blog10 min Read


KYC AML Guide: the Clock shows the average reeding time of the blogJanuary 17, 2024

How to Prevent Identity Theft with KYC

Identity Theft is rising with alarming numbers and secure Identity Verification has become a challenge for KYC Solutions. A recent report revealed that every 22 seconds there is an attempted identity theft. In 2024, it will be a bigger threat than ever before. Today we will talk about how Fintech, their customers, and the KYC Solution providers can join hands to prevent Identity Theft and play their part in mitigating this social ill.

Belal Mahmoud

KYC Product Consultant

What is Identity Theft?

It is a fraudulent practice of using someone else’s identity documents including his personally identifiable information to obtain illicit gains like credit card loans, bonuses, etc.

Identity theft is a punishable offense and according to Federal Law 18 U.S.C. § 1028 (a)(7) Identity Theft and Fraud carries a maximum sentence of 15 years in imprisonment, fine, and confiscation of the criminally earned property.

Types of Identity Theft


Impersonation (Classical Identity Theft)
  • Impersonation is one of the most common tactics of committing identity theft in which the imposter assumes the identity of a real living or dead person.
  • In business terms, it is also known as identity spoofing.
  • This allows them to claim bonuses, and insurance claims, apply for bank loans, and commit other fraud types.
  • Impersonation can be done by forging physical identity documents, disguising physical appearance, or even creating fake social media profiles.
Account Take Over (ATO Fraud)
  • The perpetrator gains unauthorized access to a victim’s existing accounts, such as email, social media, or financial accounts.
  • Then the fraudster takes control of those profiles and identities for illicit activities.
  • It causes both monetary loss and reputational damage to the victim.
  • Cybercriminals extensively use deceptive emails, websites, and fake promotional messages as bait for users.
  • Once a user clicks or views their phishing content, they can hack the user’s identity and information.
  • In this fraudulent attack, the perpetrator may pose as a government official or a bank representative.
  • The perpetrator may also have realistic government-issued IDs and law enforcement badges to disguise and deceive users of a bank.
  • A skimmer is used as a disguised ATM Card reading device attached to the card insertion panel with a magnetic strip to skim the ATM card’s data and use it to steal the money in the account.
Social Engineering Fraud
  • This tactic involves psychological and emotional manipulation of individuals and making them share their personal information.
  • Once the fraudster has gained access to personal information, they can use it to threaten the victim or simply wipe the bank account clean.
Business Email Compromise (BEC)
  • The fraudster in BEC gains access to the official email account of a manager or another key person in an organization.
  • Then this email ID is used to draw funds and request payments from peers, subordinates, etc from the same organization.
Dumpster Diving
  • This information-stealing method involved the physical theft of identifiable information from the trash and recycle bins.
  • Perpetrators of dumpster diving collect information from utility bills, payment receipts, and other such documents that are usually carelessly discarded by users.
Physical Theft
  • Stealing someone’s identity card, entry pass, personal file, and other documents to use them for illicit activities.


How Customers Can Prevent Identity Theft Attacks?

Keeping in mind different types of Identity Theft Attacks, Customers themselves can take simple and easy steps to safeguard their personal information and secure their finances. Here are a few practical tips that have been proven to prevent most Identity Theft Attacks.

  • Using Strong Passwords is the key to protecting personal information at all times. Instead of using your birthday or wedding anniversary date, use a combination of Capital and Small letters with numbers and special characters. This will make it nearly impossible for a hacker or an attacker to hack your password. Also, you need to be sure that whenever you are typing in your password, your screen, keypad, and your position must not be visible to anyone.
  • Enabling Multi-factor authentication (MFA) can also add an extra layer of security to your credentials and protect your personal information. Use a combination of biometric authentication factors like fingerprint, facial recognition, and a voice note to strengthen your guard against identity theft.
  • Do not use public Wifi, especially in a jurisdiction where cyber regulatory laws are weak. People can steal the information through your login information.
  • Refrain from falling prey to a seemingly attractive offer sent to you via email, brochure, or a website that sounds amazing in offering rewards, prizes, and other forms of incentives. These are 99% scams and are only there to steal your money.
  • Regularly monitor your financial transactions to check for any unusual and suspicious transactions and immediately report to your bank in this case. Also, change your mobile banking application passwords, pin code ATM, and other credentials on an immediate basis.

Tips to Identity Fraud Prevention for KYC Identity Verification Solutions

Generally, KYC Solutions are strong enough to filter out any suspicious identity or anomaly through different features like Liveness Detection or Morphing Detection. However, few benchmark practices can help a KYC Solution to better scale its Identity Verification tool and equip it against the evolving types of Identity Fraud Attacks.

KYC Best Practices against Identity Theft


  • Dynamic Risk Scoring is the feature that can prevent evolving Identity Fraud Attempts. It assigns risk scores to different activities of customers and flags any suspicious ones.
  • KYC Solution can have a threat intelligence feature to enhance its capability to stay updated with the latest techniques, and fraud tactics. This will also help in continuous improvement in the accuracy of risk assessment.
  • A Cross-Channel Fraud Detection Mechanism is a handy feature that KYC Vendors should consider to enhance their ability to detect fraudulent attacks over multiple devices like mobile phones, laptops, etc.
  • KYC Tools should also have a robust incident response plan in case a fraud attempt is successful. There should be an efficient and quick mechanism to report the incident to law enforcement for the quickest possible action to counter the attack.
  • Behavioral Biometrics can also be considered for more sensitive accounts to protect their identities from spoofing.


What is the Responsibility of Banks and FIs in Identity Theft Prevention?

Firstly, banks should implement a KYC (Know Your Customer) Solution and implement Customer Due Diligence (CDD). They should select the KYC Solution that distinctively offers an Anti-Fraud feature that is focused on detecting identity fraud attempts. For this purpose, they require comprehensive industry-level testing metrics that can illustrate the performance capabilities of KYC Solutions through a comparative analysis.

Final Word

KYC Identity Verification Solutions need to understand the evolving identity fraud tactics and improve their IDV Tools accordingly. Only then we can hope for a strong foot against cyber criminals. Lastly, KYC AML Guide stands as a knowledgeable partner for banks, FIs, and other fintech to help them choose the best KYC Solutions.


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Belal Mahmoud
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Belal possess over 8 years experience in the KYC Identity Verification industry. He has consulted KYC solutions for over 20 new economy companies at DIFC and ADGM while ensuring a seamless technical integration and helped in jurisdictional compliance audits.