Will this system work?
No!
Any pitfalls?
Hundreds of them.
First, a guy that wants to scam won't be stopped by an ID check.
You can buy those, you can ask homeless people for them and with 5$ you got a new identity.
Just because you know the name of a person and his address it doesn't mean you can trust them.
Everybody knew who was behind BFL, HashFast, Kncminer, did that help? No.
Bitconnect, with all those "celebrities" coming in public and shilling for it?
And the list is damn long, TF was a trusted member here, escrow.ms even more and he got arrested, and many many more.
A simple ID won't stop people when there are thousands of dollars on the table or even millions.