ING leads in online banking security

BRANCHLESS retail bank ING Direct has led the way in using anti-money-laundering identification processes to come up with a method for opening an account purely online.

The Dutch bank has claimed bragging rights for the first end-to-end online account opening facility in Australia, with a service that was launched on Saturday.Other banks are expected to follow ING Direct’s lead, which uses an almost instant online identity verification process instead of the traditional 100-point security check to allow customers to open savings and term deposit accounts.

ING Direct has taken advantage of new AML legislation that allows financial institutions to replace the traditional 100 point security check, which uses physical documents such as passports, with electronic AML compliance checks.

AML and counter-terror financing laws introduced in December oblige about 40,000 banks, credit unions, brokers, lenders and casinos to verify the identity of customers each time they open an account, obtain a loan, buy traveller’s cheques or make an electronic funds transfer.

Under the laws, service providers must also report all kinds of “suspicious” activity to the AML regulator, Austrac, for further investigation.

“The AML and counter terror financing legislation changed last December and one of the effects was that it made the verification piece channel-neutral,” ING Direct direct business executive director Lisa Claes said.

“Before then if you had an account that fell into one of the prescribed categories under the old Financial Transactions Reports Act you could only identify through a variety of face-to-face means.

“We were able to show the Government that electronic verification was robust and an alternative method to face-to-face. The legislation now says you have to conduct verification but it doesn’t proscribe the channel.”

The bank’s online process requires applicants to be Australian citizens resident here, with an Australian residential address and phone number.

Customers fill out an online application form and their identity is checked by FCS Online, a third-party identify verification service.

FCS Online cross-checks identity information with public databases such as telephone directories and electoral rolls and also checks AML/CTF warning lists held by the Australian and US governments. As a privacy measure, the information is then discarded, according to FCS Online.

“We are talking with all the major banks at the moment,” FCS Online managing director Tony Fitzgibbon said.

The old 100-point “in-wallet” style of verification was vulnerable, especially if someone stole a wallet and used it to steal an identity, he said.

“We can ask questions that people don’t have answers to in their wallet,” he said.

Other banks are investigating the online AML identity checks, but ING Direct would appear to have a first mover advantage of some months.

Ms Laes said it took about eight months to set up the online system.

“As a direct bank, what we were aspiring to do was introduce a process whereby customers could open an account online without touching any paper. Most banks in Australia say they have online application but in fact it means populating an account form, printing it out and then sending it in.”

Article source: www.theaustralian.news.com.au