Verification of a customer’s identity is essential for banks and financial institutions when establishing a customer relationship.
This step is part of the process known as Know Your Customer, the aim of which is to satisfy regulatory requirements, including for the fight against money laundering and the financing of terrorism, and to reduce the risk of fraud arising from identity theft.
To fulfil its obligation of verifying identities, the financial services provider asks the customer for, amongst other things, proof of identity. This requires the physical presence of the customer, which in itself confirms that the latter exists.
Today, the use of new technologies is revolutionising the current procedure as we move into the digital era. In fact, establishing a customer relationship at a distance is now technically possible. Online identification works thanks to video contact.
In concrete terms, this means that the operator asks a number of questions in order to make sure that the person is actually present and that it is not just a recording. The proof of identity is then presented to the camera.
This process is possible because the quality of a video conversation is considered to be equivalent to a face-to-face meeting. Furthermore, the conversation is archived and the application of algorithms is used to verify that security measures have been respected and to compare the photo on the document with the customer’s face.
The entire process is governed by strict procedures in terms of data retention, security and the training of staff who are authorised to use the system.
FINMA, the Swiss regulator, allows banks to establish customer relationships remotely using a video camera, a smartphone or a computer. Other European regulators have also recognised the procedure, such as Germany and Austria.
France is expected to complete the transposition of the 4th directive by publishing a decree concerning the acceptance of electronic identification devices in compliance with the eIDAS standard.
In the Principality, the draft revision of the law against money laundering, the financing of terrorism and corruption, calling for the adoption of measures equivalent to the 4th European directive, requires the institutions in question to exercise greater diligence about identification when establishing a customer relationship or carrying out a transaction with a customer who is not physically present, especially where new technologies are used.
Today, specialised companies offer applications with multiple options for integration into information technology environments, while satisfying the requirements of regulators, such as FINMA in Switzerland, BaFin in Germany and FMA in Austria.
In a world that is changing faster and faster, the banking industry, including regulators, are adapting to the means needed to modernise and secure identification and identity verification processes.
