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Securitize iD: The Ultimate Verification Process

The best way to ensure fast verification and consistent investor records.

May 6, 2020

Investor Identity — A Common Problem

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Technology and automation are crucial factors for scaling and running a business efficiently. At Securitize, the world’s leading platform for the issuance and management of digital securities, we are keenly aware of this fact.

Since 2017 Securitize has provided issuers of digital securities a faster, more efficient, and convenient way to issue and manage their financial assets thanks to our DS Protocol. However, in our years of modernizing how assets are managed we have seen the financial world struggle repeatedly with a particular regulatory obligation called, KYC, or “Know Your Customer”. These three little letters represent an endless process of information retrieval, identity verification, and documentation checks. A process that becomes even more painful when dealing with institutional investors.

KYC is a fundamental requirement within the financial services industry and a key component for any compliance program. It is the first of many steps in preventing bad actors from gaining access to an organization’s platform, which is why as an SEC-registered transfer agent, Securitize takes additional steps to ensure compliance while acting within a transfer agent capacity. Ultimately, the company issuing securities is responsible for guaranteeing that the investors appearing on their capitalization table are compliant with the regulations passed by financial authorities.

In theory, investor verification seems simple. In reality, KYC is a cumbersome process rife with problems and inefficiency.

““It takes on average 26 days to onboard an institutional client.””

— Survey carried out by Thomson Reuters

According to a survey carried out by Thomson Reuters, it takes an average 26 days to onboard a new institutional client. The process is long and expensive, with financial institutions of $10 billion or more in revenues spending around $150 million a year in compliance checks and needing an average of 307 compliance personnel to deal with the process. In addition to onboarding, documenting, and maintaining current KYC records of all institutional clients is a complicated procedure that can lead to problems with authorities should an audit occur and documentation has been misplaced or is inconsistent.

On the other side of the process stand investors, for whom the verification procedure can be slow and irritating. In a world of immediacy where people become ever more demanding, users want fast and efficient processes, possibly leading them to thinking twice about investing if it takes too long to do so.

However, we would be short-sighted if we thought of verification only pre-investment. During the lifecycle of an asset, many more players are involved and they all have compliance obligations. Custodians have to KYC investors to hold their digital securities. Broker-dealers and secondary markets also have to comply with their set of rules and regulations. No one is exempt from carrying out KYC in the capital markets.

For these reasons, we’ve decided to launch Securitize iD.

The solution: Securitize iD

At Securitize, we have been working to solve the inefficiencies inherent in the traditional KYC process. We want to ensure fast and reliable verification processes, consistent records per investor, and coverage for both individuals and institutions.

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Securitize iD login button

Securitize iD carries out the traditional verification process in a more efficient way. Some of the advantages of using Securitize iD are listed below:

  • Faster and Unique Verification: Securitize iD allows investors to complete KYC once in a process that can be carried out in minutes. They can then reuse their identity, ensuring consistency in their records and satisfaction for the user.
  • KYC for individuals: Securitize iD supports a high-grade investor KYC which includes selfie identity, government-issued photo iD and proof of residence.
  • Entity KYB: Securitize iD supports verification of businesses, complying with all the requirements of Knowing Your Business (KYB), including but not limited too, ultimate beneficial owners, organization incorporation documents, and KYC of legal signers.
  • API First: Securitize iD can connect with any platform to integrate a KYC verification flow easily with any of your current business processes.
  • Ongoing Monitoring - Nightly Screening: ‌Securitize uses a third-party service provider to conduct nightly screening on all investors that have been onboarded through Securitize iD. The investors are screened against various domestic and foreign government sanction watchlists inclusive of OFAC, European Union, Interpol and many more.
  • ‌Ongoing Monitoring - Documentation Review: Securitize iD keeps the investor’s documentation valid and up to date by automatically prompting investors to upload a new government-issued photo iD should it expire.

Conclusion

Securitize iD sets yet another milestone in Securitize’s mission to increase liquidity for assets that have traditionally been illiquid. Private markets are already illiquid by nature, and the demanding KYC requirements may slow the ability to participate in these markets. Whenever trying to liquidate a position, all the back and forth needed for a transaction slows down the process, the immediate corollary being that fewer transactions are carried out in the end. Compliance is a top priority at Securitize and we remain diligent when complying with the letter of the law. We believe there are many advantages for participants in the capital markets to using Securitize iD.

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