Identity as the Gateway to Integrity Solutions

Jay Collins, Vice Chairman, Corporate and Investment Banking, Citi

Washington, D.C.

Federal Identity Forum and Homeland Security Conference

September 12, 2017

Steve Johnson in his seminal book on innovation writes about how technologies

create building blocks that open new doors to solutions previously unthinkable.

Take as an example the advent and convergence of broadband, the internet and

digital compression technology that gave us YouTube. Johnson calls this

concept the “adjacent possible.” Advances in identity solutions when bolted into

other advanced technological building blocks, like blockchain and artificial

intelligence, are opening the door to new “adjacent possibles,” including brilliant

new ways to address some of societies greatest challenges. One of these

challenges is the cancer of corruption; I would like to spend a few minutes today

focused on how identity solutions provide a gateway to meeting the integrity

challenge.

Before jumping into specific identity solutions that empower the fight against

corruption, it is important to provide some background on an 18 month global

public private partnership called “the Citi Tech for Integrity Challenge”, unique in

its ambition, approach and scale. This collaborative effort began in early 2016,

during a brainstorming session at Citi on how to use “crowd-sourcing” as an open

innovation methodology to tackle a major global challenge. Having studied the

United Nation’s Sustainable Development Goals, we were struck by the

magnitude of the corruption challenge, SDG 16.5, and how interested our global

clients were in finding solutions. We knew that multiple technological buildingblocks,

including advances in identity technologies, had opened the door to

potentially game-changing anti-corruption solutions and that many of Citi’s most

innovative clients would embrace a focused open innovation effort to “do good”

and “do well” at the same time.

Thus, the “Tech for Integrity Challenge,” (“T4I”) was born. Citi was promptly

joined by MasterCard, Microsoft, IBM, Facebook, Clifford Chance, Lets Talk

Payments and PWC to launch T4I. These strategic allies were also supported by

over 70 governments, NGOs and multilateral organizations, such as the UNDP,

IADB, and the World Bank, to name a few. We kick-started T4I at Davos in early

2017, and began by crowd-sourcing integrity pain-points from subject matter

experts bucketed into eight “pain point” pillars. From several hundred qualified

registrants, we selected 213 to be put through the T4I “accelerator program”, and

ultimately selected 96 companies to showcase their solutions in six countries

around the world between May and June of 2017. In October of this year, the IMF

will host an award ceremony to recognize companies with game-changing

integrity solutions. My talk today will draw on many of the T4I finalists and their

solutions.

One of the fastest growing global crimes is identity theft; identity challenges feed

bribery, contribute to fraud and create barriers to financial inclusion. A shocking

1.1 billion people in the world still lack a legal identity. During the T4I challenge,

we saw a myriad of advancements in biometric, behavioral, device and token

driven identity related solutions that together can drive a surge in global identity

initiatives and other fintech innovation; The way to unlock the “fintech toolkit” is

often with a robust identity key; similarly, little can be accomplished in the

integrity world without first solving for identity issues.

Multi factor, layered identity solutions, used for identity on-boarding and

verification, or for transaction authorization, increasingly draw on ever-advancing

biometrics. PayYap, for example, has added IBM voice authentication technology

to its e-commerce payment solutions. TOC biometrics is commercializing

multifactor biometric identity approaches for its document solutions. Facial

recognition tools are increasingly used, yet like voice recognition tools, need to

protect against replicas and replay attacks. iProov, a company working with the

UK government, is addressing that need with their flash technology, which is

combined with a layer of machine learning to provide high-grade facial

recognition.

Capturing and utilizing multi-source data to layer in additional identity comfort is

an increasingly used methodology. ID.me, a U.S Government service provider

that will speak later at this conference, presented a solution that allows veterans

and other citizens to access multiple government services and benefits through

one portal with a single sign-on. In addition to the citizen convenience factor, the

solution combines multi-factor, and multi-layer identity tools to maximize identity

verification, including external credit bureaus, telco data, fraud algorithms, social

media verification, and machine vision (imaging inspection).

Not unsurprisingly, government payment processes with human interaction,

create a plethora of integrity pain-points. If we seek to reduce the number of

global bribes paid, for example, we have to go after physical interactions between

recipient citizens and distributing public officials. Too many governments

distribute benefits without appropriate controls or verification mechanisms;

unidentified or poorly identified recipients falsely claim entitlements, receive a

benefit more than once, or do not use the benefit as intended.

A perfect example of this are Conditional Cash Transfers (“CCTs”), which make a

benefit conditional upon a corresponding activity or behavior, such as educational

stipends for school attendance, or health payments conditioned upon getting a

vaccine. CCTs have been a conceptually fantastic way to improve benefit

incentives and impact, yet have introduced extraordinary paper and manual

administrative bureaucracy into the payment process, actually increasing

corruption potentialities.

Digital identity solutions applied to CCTs change that paradigm completely;

electronically identifying both the beneficiary and the authorizing party enables

the automation of the authorization and payment process. Companies like

PalPay in Palestine, and Myndgenie in India identify both the benefit recipient

and the authorized condition certification professional, electronify the certification

process, and then automatically release a benefit payment, radically reducing the

corruption potentiality and providing hard data impact analysis for benefit

programs. Mindgate, also in India, built an event and rule based engine that

automates conditional benefit programs, driving down leakage of their programs

from 30% to near zero and taking the certification and payment process from 180

days to only 3 days. Mindgate uses Aadhaar, India’s identity program, which is

driving India’s extraordinary progress in financial inclusion. Like MPesa in Kenya,

Aadhaar is unlocking a firestorm of innovation, unleashing tens of thousands of

companies that are buiiding a myriad of applications off of the back of the world’s

largest scale digital identity solution.

Identity challenges go to the heart of the principal pain-points associated with

providing aid payments in remote areas to refugees, victims of civil conflict and

natural disasters. Remote and operationally challenged geographies, when

married to unbanked and unidentified individuals, create a burning need to

develop quick and efficient identity on-boarding tools that can be appropriately

used across government, aid and developmental organizations. The corruption

pain points are magnified exponentially when the identity challenge is not met, as

many organizations by default turn to cash distributions.

Digital crisis fund distribution options that are better than cash from an integrity

perspective still primarily include cards and mobile wallets. As mobile wallet

ecosystems are further rolled out and gain critical mass, mobile payment options

will become a more effective tool for crisis relief management. However, the

mobile wallet payment and collection benefits, combined with data exchange and

location based technologies, are only achievable with sustainable

telecommunication and energy infrastructure.

While “vanilla” pre-paid cards have been “tried and tested” in those

environments, technology and cost efficiencies driven in large part by

investments by companies like MasterCard, have launched a smart card

revolution. As we saw repeatedly throughout the T4I Challenge, companies are

implementing smart card solutions that lead with identity, providing new onboarding

techniques, advanced biometrics, re-loadable functionality, robust

transparent and analytical back ends, and an ability to function with or without

internet connectivity.

In fact, some of the most interesting financial inclusion innovators are using sms,

ussd, rfid, and nfc technologies to bring the benefit of electronification of

information and payments to the last mile, without relying on internet

infrastructure connectivity; these low-tech, or “flex-tech” solutions are ideal for

remote financial inclusion initiatives or in emergency government responses to

natural disasters or refugees. But even the low-tech options start with an identity

solution. For example, Paycode, in Ghana, has combined a smart card, a

biometric identity solution and a “bank in a box” model that doesn’t rely on

internet connectivity to function. The Paycode solution has significantly reduced

fraud, particularly in the area of “ghost workers”.

Meeting the impact analysis needs of the Official Development Assistance

community is greatly facilitated by the combination of multiple digital tools. AID:

Tech, an Irish company that has proven itself to world class NGOs and large

developmental institutions, demonstrated just such a multi-tiered aid solution

during T4I; its service integrates advanced identity solutions and data analytics

designed to meet very specific aid impact needs. AID:Tech is also an example of

a company built on a blockchain platform, which makes distribution records

immutable, transparent, auditable and searchable.

Whether it be hiding identities through the dark web or through beneficial

ownership schemes that obfuscate individual and corporate identities, identity is

also at the core of the challenge of illicit financial flows (IFFs). IIFs represent one

of the most globally threatening areas of corruption, and have proven to be a

quagmire for governments, regulators and financial institutions alike. Global

financial crime is estimated to be approximately $1-2 trillion dollars a year, which

by many accounts is not shrinking, despite billions of dollars of spend by the

global financial community. The technologies and solutions reviewed through the

T4I process have the ability to shine a spotlight into the dark room of financial

crime. However, perhaps more so then any other pain-point pillar, the financialregulatory-

law enforcement ecosystem will have to come together in an

unprecedented way to facilitate, permit and coordinate a more robust accelerated

adoption of potential solutions.

That said there is much that can be implemented now. In particular, the AI driven

solutions to significant Know Your Customer (KYC), Anti Money Laundering

(AML) and Counter Financial Terrorism (CFT) pain-points are significant.

Companies like Tradle, which provides one stop shopping for KYC functionality,

bridging internal and external networks, have tremendous potential for the IFF

community.

In the past, AI has been difficult to apply to unstructured data, such as emails,

voice, sms, computer logs, chats and social media; however now AI and machine

learning (“ML”) can be applied with extraordinary potential outcomes to both

detection and enforcement challenges. Take for example the issue financial

institutions are having with “false positives” for AML alerts, where tens of

thousands of alerts are manually reviewed and only a small fraction actually turn

into a Suspicious Activity Report. AI and ML can bring a massive speed, cost and

efficiency gain to this problem. Furthermore, advances in combining behavioral

science and AI with applicability to KYC, AML and CFT represent one of the most

powerful areas of potential integrity progress in the IFFs area. Take for example

the work of Quantexa, which can deliver a behavioral assessment of a potential

or current customer/citizen by giving a 360 degree view of all behavioral network

connections in and around one identified individual, providing a credit-risk score

that is additive during the KYC and AML processes.

James Wolfensohn, in his historic 1996 speech as President of the World Bank,

called the world to action by urging us to “deal with the cancer of corruption.”

More than 20 years later, we can definitively say that we have the technological

tools at our disposal. Public Private Partnerships, combined with open innovation

models, have given us a powerful approach to take on this mega-challenge. Now,

it is up to the public and private sectors to work together to aggressively

implement the technological and identity solutions to find and fight this cancer