It is increasingly difficult to open a bank account these days without a thick handful of official documents.

Most organisations offering financial services now ask for driving licences, birth certificates, passports, utility bills or council tax records.

The idea is to crack down on financial crime by making you prove that you really are who you say you are.

Originally this "know-your-customer" process was designed to deal with money laundering, by ensuring that the bank was sure about the identity of the person benefiting from the account or loan in question.

Now, the aim is also to cut down on identity fraud, where someone pretends to be someone else to gain a financial advantage.

Real thing

But there's a problem with this welter of paper.

How can an overworked cashier or salesperson be sure that the paper isn't a fake?

Or, indeed, that entirely genuine documents have not been stolen and abused by a fraudster out to make a fast buck - even if it means ruining someone else's life?

This problem of ID fraud is growing.

The crime is costing the UK more than £1.3bn a year, the Home Office says.

Once we get some government departments on board, others will follow Chris Gahan, British Telecom How BT's URU will work

As for the US, the problem is even bigger: the US Federal Trade Commission estimated earlier this year that it could be costing Americans as much as $46bn.

Who are you?

Obviously the first line of defence against ID fraud is the initial check, to see whether the documents presented to financial institutions are real.

But the first problem is that the proof is spread across dozens of databases up and down the country.

And the data they contain is guarded by the Data Protection Act, which tries to stop guardians of our personal information from simply throwing open the doors and letting everyone check out whether you are who you say you are.

British Telecom is one company seeking a way of making the data easier to access - and at the same time keep the walls around it intact.

Its solution is URU ("You are you"), a system which already exists to check energy and phone company records to see whether the bill handed across the counter is a real record or just a fake.

According to Chris Gahan, data development manager for BT Government Stepchange, centralising the process through an intermediary like BT could cut the cost of an identity check from about £20 a customer to roughly £1.

"It's cost-effective - and it ups the fraud barrier," he says.

Official sanction

The problem has been the public sector.

Understandably the government has been rather reluctant in the past to let information about citizen's identities out of its sight.

IDENTITIES AT LARGE UK population: 58,789,194 (Source: 2001 census) Driving licences: 13 million photo card, 28 million paper Passports: 44 million National Insurance numbers: 72 million

In a series of workshops over the past year, companies have told BT that on a scale from one to ten, the level of co-operation from the government "was zero", Mr Gahan said.

Technical difficulties also dog the process.

But URU could provide the answer, by making sure the information never leaves the government department.

BT simply presents the information from a driving licence or passport, and asks whether it matches the records.

If it does, all well and good. If it doesn't, then there's probably a fake involved.

The Passport Service is one department which is coming on board.

It has already trialled sharing data from the private sector to try to make sure passports only go to the right people, as well as accessing other official data such as birth and death certificates.

"Data sharing will enable existing ID validation processes to be improved, with stolen IDs being more easily recognised," a spokesperson told the BBC.

Fraudsters steal real documents to get bank accounts

And according to Mr Gahan, the upgrades now made to its database should allow systems like URU to access the information as well - while other government departments are also beginning to take an interest.

"Once we get some on board, others will follow," he says.

Real - but wrong

But none of that can solve an equally serious problem: the use of real documents by the wrong people.

Almost 40 million driving licences exist in the UK, and two thirds of them are paper documents with no photos or other security features.

Thousands are stolen every year - and some of them are used in fake identities.

According to CIFAS, the UK's fraud investigation service, there are no statistics for what proportion of ID fraud cases involve real but abused documents.

"The difficulty with passports, driving licences and so on is that they were never intended to be used as identity documents," June Hale, the organisation's head of member services, told BBC News Online.

"You can go to the Driver and Vehicle Licensing Agency and ask whether a licence is genuine, and get a yes or no - but there's no way of knowing whether the right person is holding it."

That, Ms Hale says, is why institutions check a number of different documents, meaning a prospective fraudster would need to steal or forge a range of paperwork in order to confirm the false identity.

CIFAS is jacking up its training and advice efforts to help institutions understand ID fraud and improve their checking of documents.

Spoken word

In the future, as BT's Chris Gahan points out, the identity card under consideration by the government could help.

Each card is intended to include biometrics, measurements of iris patterns or fingerprints which are unique to an individual.

But that could take up to a decade to implement fully.

Does more bobbies on the beat mean fewer fighting crime?

Ahead of that, BT is working on using voiceprints attached to IDs that have already been verified once through URU.

To catch a thief...

Assuming that a fraudster is caught, though, what happens next remains a worry.

Certainly the suspect can be turned away - but the chances of them facing legal sanction are falling day by day.

Police forces up and down the UK are closing their fraud squads, as the Home Office pressures them to concentrate on street crime.

Devon and Cornwall's was shut down in October. Hampshire's went six months earlier. Experienced financial investigators are disappearing and the pool of skills and experience, police sources say, is trickling away.

Some financial institutions find themselves having to beg the police to arrest and charge their suspects - and even if anything happens, the penalty is often little more than a small fine.

Serving fraud squad officers themselves are unhappy - but can do little about the situation.

"Compared to muggings and burglary, fraud is below the radar," one senior officer told BBC News Online.