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A step forward the revised rules on video and online identification

 

On March 28, the consultation period on the amended FINMA Circular 2016/7 has ended.

Earlier this year, the Swiss Financial Market Supervisory Authority (FINMA) had amended its Circular 2016/7 that established the requirements for financial intermediaries to perform video and online identification of their contractual parties. Those changes have been subject to a public consultation which was set to run until March 28.

FINMA is expected to draw up a consultation report and publish the comment on its web page.

The FINMA Circular 2016/17

The FINMA Circular 2016/7 establishes the requirements that financial intermediaries have to fulfil when conducting video and online identification of their contractual parties. While setting up contracts with financial intermediaries online is gradually becoming more popular, it is important to reduce potential risks by ensuring that parties are correctly identified.

In particular, the Circular addresses compliance with the Swiss Anti-Money Laundering Act and the FINMA-regulation on Anti-Money Laundering.

Before the changes, the Circular established that video identification of a contractual party should occur in real time and should be recorded. Moreover, the identity of the contractual party had to be ascertained through a single-use password, the TAN, which was sent to the party – for instance via SMS. The issue lied in the fact that the TAN did not add much value to the identification process.   

Amendments to the circular

After the changes, the verification through a TAN will be no longer required.  Instead, the identity of the contracting party will be ascertained using cross-checks and verification of identification documents.

In particular, FINMA requires the financial intermediary to verify at least “three randomly selected visual security features on the identification documents”: these security features may consist, for instance, in an optical mark or a kinegram present on the document that the contracting party has to show during the video identification process.

Financial intermediaries will also have to compare the identification document with an online database.

Finally, payment transfer from a Swiss-based bank will no longer be required. Payment transfer from a bank based in a Financial Action Task Force (FATF) member country will be permitted, provided that some requirements are satisfied.