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FATF Guidance on Digital ID Systems: Key Takeaways

In a bid to enhance financial services’ compliance with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, the Financial Action Task Force (FATF) has issued revised guidance on digital ID systems. The new guidelines aim to provide clarity on the use of these technologies in customer identification and verification processes.

Risk Assessments Crucial

Regulated entities are required to conduct a formal risk assessment of e-KYC/digital ID technologies, taking into account factors such as:

  • Level of assurance provided
  • Accuracy of underlying information
  • Potential risks associated with the technology
  • Appropriateness of application for the relevant client base
  • Timeliness of updates
  • Cyber security measures

Video Conferencing and Selfies

The revised guidelines clarify that video conferencing is not considered a face-to-face meeting, requiring additional checks. For verification purposes:

  • Photographs or videos should clearly show the person’s face
  • Holding an identity document to demonstrate ownership
  • Video conferencing can be used to identify natural persons such as directors and officers for corporate legal persons or legal arrangements
  • Regulated entities must verify constitutional documents presented during a video conference against public sources

Accessible Records

It is essential for regulated entities to maintain accessible records of digital ID systems, including:

  • Types of identity evidence used
  • Data source
  • Date/time
  • Means of accessing it

Key Takeaways

  • Conduct a formal risk assessment of e-KYC/digital ID technologies
  • Consider factors such as level of assurance, accuracy of underlying information, and potential risks
  • Use video conferencing for corporate legal persons or legal arrangements to identify natural persons
  • Verify constitutional documents against public sources
  • Maintain accessible records of digital ID systems

For further guidance on these requirements, financial service providers (FSPs) may refer to the Statement of Guidance on Nature, Accessibility and Retention of Records issued by CIMA.

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Disclaimer

This update is intended to provide general information only and does not constitute legal advice. It is recommended that clients seek professional advice on their specific circumstances.