Government databases could replace document-based ID verification: Sumsub CTO

Government databases and centralized solutions may one day replace document-based verification, Vyacheslav Zholudev, Sumsub’s chief technology officer and co-founder told Biometric Update in a recent conversation.

Talking about his role at Sumsub, the executive first says he also considers himself a “product guy.”

I’m involved a lot in building products and having a strategic vision of where we are going, why it’s important not only to deal with infrastructure […] but also trying to be a product person […] because it’s really important to translate what you have in mind into the code.”

Regarding where Sumsub is now as a KYC/KYB/AML provider, Zholudev says that as the company grows internationally, regulatory challenges are starting to present themselves.

“Bigger companies typically also work in many regions, and therefore regulations are different. For example, in New York State City, some clients are not allowed to sell crypto, or some bigger clients have conditions like if a [customer] comes from [certain] countries, then you need to request a source of funds.”

Sumsub recently released a no-code tool for configurable user journeys, but Zholudev says that the company could run checks based on different regulations and requirements even before that.

“The orchestration was done by our clients. And then it also led to more complexity, then sometimes our clients didn’t find enough time to implement this thing. So they had limited value from our product.”

At that point, the executive says, Sumsub realized the missing piece was the ability to orchestrate its biometrics and other tools.

“So basically put more and more responsibility of the customer lifecycle to our shoulders, but not forcing clients to implement themselves.”

According to these principles, the company built a system capable of embedding several things, including email, phone verification, and custom questionnaires, and to build on those data points as well as transitioning between different requirements.

In this regard, Zholudev tells Biometric Update that Sumsub is planning to add a new feature to its orchestration platform, designed to enable the company to edit clients’ conditions using an auto-completion feature.

“Since we have lots of variables in our system, it’s very important for our clients to be able not to make mistakes,” the CTO explains.

Discussing fraud identity trends

Speaking about mistakes, and those connected to security in particular, Sumsub recently published its latest identity fraud report.

When asked about interesting trends from the research, Zholudev said that fraudsters typically target markets where they know they can steal substantial amounts of money or where they know documents are easy to forge.

The second trend is likely going away soon, the executive says, as government databases around the world are quickly evolving, making things also challenging for KYC providers.

“Sometimes it’s not super easy,” Zholudev explains. “You need to have, for example, a registered entity in this particular country [to operate in it], but then it gives an additional layer of security. So, therefore, I see this trend that maybe document-based verification will fade out eventually.”

At the same time, the executive believes that for companies verifying customers within particular infrastructures, there are also different challenges.

“[Most companies can read] machine readable zone documents. Right? But when it comes to Indian Aadhaar, for example, or Brazil paper driving license, they cannot process [them] and therefore the conversion is lower,” says Zholudev.

“We see a lot of potential because working in those countries is very hard. But we do work and know how to work [there] because we started with complicated regions. So for us, it’s just easier to penetrate those markets because there are not so many options.”

Struggles of ID verification in crypto

KYC challenges also extend beyond individual countries, and towards entire industries.

According to Zholudev, for instance, crypto projects are often global by nature, so KYC providers need to be able to operate in several countries and understand all of the documents utilized by their governments and citizens.

Additionally, the CTO says that fraud rates are higher in the crypto industry as individuals tend to be more anonymous, and some transactions are non-reversible.

“Crypto [can become] a very convenient means to launder money or bypass those sanctions. So, therefore [firms] should be super diligent and super careful.”

In this regard, Zholudev also mentions the Travel Rule, a key AML/CFT measure designed to increase the security of cryptocurrency transactions by requiring additional information during a transfer of funds from one wallet to another.

The tech expert says that Sumsub is currently working on a solution to embrace the Travel Rule, but more information about it will only be available over the next few weeks.

“There are a couple of companies that are actually also trying to do this, but nobody has a fully working solution,” Zholudev says, referring to fully-compliant KYC solutions for the crypto industry.

“It reminds me a little bit of GDPR when it was just released, nobody knew how to handle it, and everybody was just kind of interpreting in a way that it was safe, but still kind of easy to implement.”

Zholudev believes the same is happening with the Travel Rule, with some companies doing their best to verify user identities but occasionally passing transactions even if they’re not sure.

Merging KYC and KYT to improve customer experience

Whether in crypto or other industries, however, Zholudev says that keeping in touch with customers throughout the whole customer journey is essential to build trust.

He mentions a use case where an individual enters a car-sharing company’s vehicle with a stolen identity. Sumsub checks driving licenses upon onboarding, but they may ask for face biometric checks after that to make sure the user is the account holder.

Combining the KYC with Know Your Transaction (KYT) is also interesting, Zholudev explains, because it provides extra insurance that fraud risks can be reduced.

“You can set up the flow in such a way that when suspicious transactions are going through, you request a liveness check again. And then when the user passes those liveness checks, then the transaction is automatically approved. So it’s faster, secure, and involves less human work.”

Despite the focus on automation, Zholudev says Sumsub is currently expanding its team in terms of technical people, sales and marketing.

“Expanding the team […] is essential. But also, if you expand the technical team and you automate as much as possible, then you probably need less highly skilled people for checking verification.”

“And the good thing is that we can actually control [the automation flow],” Zholudev explains. “Maybe the conversion slightly goes down, but then you can regulate it, and that’s something that we’re proud of because we can balance it […] depending on the volumes, traffic, etc.”

Future of KYC: liveness for deepfakes, central databases, blockchain

Talking about the future of compliance and, more specifically, Sumsub, Zholudev says there are several technologies that are or may become part of KYC processes.

“Three years ago, there were no liveness checks, or they just started to emerge. [Today] there are lots of phones [supporting] that,” the CTO adds.

“But deepfakes are coming, right? And they’ve become a commodity. Before, you needed to have a really powerful machine to render nice deepfakes. But now they’re just a click on your phone. So, therefore, something new might be coming.”

Zholudev also suggests that document-based verification may be replaced entirely by government databases in the future.

“The European Union [may] have a central database that you can connect to, and it will be more secure. Maybe people will have chips in their hand so that they can verify that you are really the same person that you claim you are.”

Finally, the Sumsub executive points to blockchain technologies and how digital identity could one day be stored exclusively on the blockchain, enabling individuals to control what data to share with other people.

As for the company, Zholudev thinks Sumsub will become more of a compliance toolkit in the future.

“[We will be] a tool that you can install once, and then you’re fully compliant. You can manage cases, you can be protected against fraud, you can control different things and automate reporting to certain entities,” Zholudev says.

“Some companies actually already started [working on this], and then [went] bankrupt or [closed] their business because it was not the right time. Now I feel that this time is coming when we’ll soon be ready for this.”

Article Topics

biometrics  |  digital identity  |  document verification  |  face biometrics  |  fraud prevention  |  identity orchestration  |  KYC  |  secure transactions  |  Sumsub