Welcomes FATF guidance to clarify how digital ID systems can be used for customer due diligence
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29 November 2019
WSBI-ESBG welcomes the opportunity to comment on the FATF Guidance on Digital Identity and contribute to the consultation process.
We would like to highlight that we welcome the FATF guidance to clarify how digital identity (digital ID) systems can be used for customer due diligence (CDD). The Guidance explains how, in a digital finance and digital ID context, effective authentication of customer identity for authorising account access supports AML/CFT efforts.
We acknowledge the evolution on digital ID assurance frameworks and technical standards, and the different developments of banking institutions on how they use these tools for assessing the reliability and independence of digital ID systems for AML/CFT purposes.
WSBI-ESBG would like to request from the FATF a Guidance on Digital Identity for legal entities and connected individuals that would also analyse the aspects of customer due diligence.
WSBI-ESBG would like to propose the following concrete amendments and comments:
Paragraph 16 (p. 5 and 6): WSBI-ESBG would like to propose a stronger wording. Instead of “could also consider" replace by “should strongly be encouraged".
Paragraph 23 (p.6): Could you illustrate with an example of low ML/TF where lower levels of assurance of Digital ID may be appropriate?
Paragraph 24 (p. 6) and Paragraph 35 (p. 8): ID solutions are one among other solutions to contribute to financial inclusion. We should not overestimate the contribution of digital ID to financial inclusion. In that sense, the World Bank in a recent study showed that globally the most frequently cited reasons for not having an account is the lack of enough money to use one, that banks or accounts are too expensive, and that another family member already has access to an account. The other reasons reported include banks being too far away, lack of proper documentation, lack of trust in banks, and religious reasons.
Paragraph 26 (p. 7): National Competent Authorities should not try to shift the burden of detection to regulated entities without supporting them properly. We propose direct access to law-enforcement databases; without it, it is difficult to detect “lost, compromised, stolen, or sold digital ID credentials/authenticators". WSBI-ESBG would propose to include the following statement 'Authorities should design a mechanism that would grant direct access to law-enforcement databases for regulated entities that will enable them to confirm the authenticity of their records (e.g., a list of lost/stolen identification records).'
Paragraph 26 (p. 7): We strongly support dialogue between regulated entities, regulators and policy makers.
Paragraph 28 (p. 7): Which internationally reputable expert body does it refer to? The FATF refers to ISO in paragraph 71 (p.16). What would be the role of a comprehensive international digital identity assurance framework? WSBI-ESBG would welcome some clarification on the role of ISO and on an international digital identity assurance framework.
Paragraph 51 and 52 (p.11): WSBI-ESBG would favour that countries adopt a general-purpose ID system. We would favour that there is ideally one ID for each function; it is also in line with consumers' preferences.
Paragraph 73 (p. 16): WSBI-ESBG would like to call on FATF to reflect on ways to have global convergence of standards.
Paragraph 165 (p.38): It is important to remind the recital 44 of the FATF's guidance on AML/TF measures and financial inclusion, which states that “in a financial inclusion context, newly banked and vulnerable groups often conduct a limited number of basic, low value transactions. Hence, they may present a lower ML/TF risk, and this could appropriately be recognized as such by the risk assessment. However, it is important to keep in mind that underserved clients represent a very heterogeneous category with very different risk profiles in different jurisdictions. Therefore, they cannot be classified as lower risk clients solely on the basis that they are low-income individuals, who have recently been integrated into the formal financial system. Countries will need to clarify if, and under what conditions, and for which type of products and transactions low value clients can appropriately be subject to a simplified AML/CFT". Hence all financially excluded and undeserved customers are not AML/CFT low-profile customers. As specified in recital 45 of the above-mentioned FATF guidance, it is necessary to consider other risk factors such as their specific operation, and the countries or areas involved in the transaction.
WSBI represents the interests of 6,760 savings and retail banks around the world. WSBI focuses on international regulatory issues that affect the savings and retail banking industry. It supports the aims of the G20 in achieving sustainable, inclusive, and balanced growth, and job creation, whether in industrialised or less developed countries. Supporting a diversified range of financial services to meet customer need, WSBI favours an inclusive form of globalisation that is just and fair. It supports international efforts to advance financial access and financial usage for everyone. WSBI members have total assets of $16 trillion and serving some 1.7 billion customers in nearly 80 countries who seek retail banking services. WSBI members are committed to further unleash the promise of sustainable, responsible 21st century banking.
ESBG is an association that represents the locally focused European banking sector, helping savings and retail banks in 21 European countries strengthen their unique approach that focuses on providing service to local communities and boosting SMEs. An advocate for a proportionate approach to banking rules, ESBG unites at EU level some 885 banks, which together employ 656,000 people driven to innovate at 48,900 outlets. ESBG members have total assets of €5.3 trillion, provide €1 trillion billion in corporate loans, including SMEs, and serve 150 million Europeans seeking retail banking services. ESBG members are committed to further unleash the promise of sustainable, responsible 21st century banking.
Published by WSBI-ESBG: 29 November 2019