Authoritative data sources, also known as primary-source data, play a crucial role in helping to prevent identity crimes, mitigate non-compliance risks and improve customer onboarding processes.
Businesses that understand and recognize the importance of using authoritative data sources can access real-time and accurate information on their customers, allowing them to make informed KYC decisions.
What's the Difference Between Authoritative Data Sources and Stored Data?
An authoritative data source is any form of data that is reliable, independent, and, most importantly, updated in real-time to provide accurate information. A great example of an authoritative data source is the Australian Death Check service. The new data cleansing service provides an official and real-time source of national death data for Australia.
Stored data refers to data that is stored and used for identification and onboarding purposes. As stored data is not updated in real-time, it can produce unreliable results and impact the KYC process.
Many businesses claim to have access to numerous data sources, however, only a small percentage of these are high quality and reliable. When deciding which data source to rely on, businesses that prioritize authoritative data can be sure they are receiving accurate and verifiable information that allows them to easily meet their compliance requirements.
The Importance of Authoritative Data Sources
In recent years, the digital landscape has dramatically changed, driven in part by the way COVID-19 has rapidly moved our lives online. This change has accelerated the digital transformation of many industries and placed pressure on businesses to improve their online identity-proofing processes.
As businesses adapt, they face increasingly sophisticated fraudsters, making it more important than ever to verify customers using the most reliable sources. According to reports, eCommerce businesses saw an 18% jump in losses to fraud in 2021. Utilizing authoritative data sources helps to combat fraud in identity information by holding higher assurance levels, allowing a business to improve trustworthiness, security, privacy, and convenience when identifying customers.
The changing digital landscape has also resulted in a significant overhaul of compliance requirements. Many global regulators have taken substantial steps to help mitigate fraud and create a level playing field for businesses. In June 2021, Europe's financial watchdog issued the 6th AML Directive (6AMLD). The goal of 6AMLD was to remove the loopholes in money laundering, expand the regulatory scope, extend criminal liability, and increase punishments. Adhering to regulatory requirements is essential for businesses, and utilizing authoritative data is crucial to meeting regulatory obligations and maintaining customer due diligence (CDD).
Consequences of not using authoritative data sources
Regulators are always looking for non-compliance. If businesses do not take necessary action to meet their AML/KYC compliance requirements, they will be fined and forced to do remedial action. Relying on stored data for compliance can leave a business in a vulnerable position, with the implications of non-compliance being incredibly detrimental to operations.
As stored data is unable to provide real-time and accurate information, it can impact customer experience. Poor quality data can lead to false negatives, affect the accuracy of the customer verification process and delay customer onboarding. While legitimate customers want to know their data is being handled correctly, a long onboarding experience will likely deter them from dealing with a business. Unnecessary friction creates a negative customer experience and can result in the potential loss of customers.
Businesses must prioritize reliable, accurate, secure, and independent data in these changing times and growing regulatory constraints. Authoritative data sources provide real-time data, which allows a business to make informed KYC decisions, meet regulatory requirements and provide a frictionless customer experience.