On 19 October, 2016 the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleisutungsaufsicht – BaFin) published an update on the transitional period regarding the new video identification process. BaFin announced that it intends to publish a circular at the beginning of 2017; which will include an appropriate transitional period until the second quarter of 2017. In the meantime, the Circular 04/2016 will remain suspended and the Circular 01/2014 will continue to be applicable.
The background of this regulatory update is the following:
Earlier this year, BaFin published Circular 04/2016 (GW) – Video Identification Process. However, following the reaction of market participants, particularly in the Fintech sector, BaFin published on 11 July 2016 a notice on its website stating that the Circular 04/2016 (GW) will be postponed until 31 December 2016. The rationale behind the postponement is twofold: firstly to give market participants which are affected by the Circular sufficient time to implement the requisite work streams and secondly to ensure they are prepared for the higher security standards the process demands.
What are the requirements stipulated in Circular 04/2016 (GW) – Video Identification Process?
The new Circular 04/2016 (GW) – Video Identification Process lists the requirements that are appropriate for the video identification of customers and complies with anti-money laundering rules and regulations. Under the Circular 04/2016 (GW) – Video Identification Process only credit institutions within the meaning of section 1(1) of the German Banking Act (Kreditwesengesetz – KWG) are entitled to use video identification. The suspended Circular 04/2017 (GW) stipulates minimum technical and organisational standards such as:
- video identification must be performed by specially trained employees;
- employees must perform the video identification in a separate room with access control;
- customer’s consent with video identification must be obtained;
- screenshots/photos of the ID documents must be taken which clearly show the relevant information;
- employees must carefully check the security elements on the ID document and verify that the ID documents is properly laminated and undamaged;
- identification process has to be cancelled if the lighting conditions or picture quality/transmission is not adequate or voice communication is not possible;
- the identified person must enter on the online platform a transaction number he or she receives via email or SMS;
- the correctness of the entire video identification process has to be reviewed by a second level within the bank;
- customers are required to perform a reference transaction immediately. This means that customers must transfer funds from an existing account to a new account within a EU member state and which is held on their name;
- public sources (e.g. internet and social networks) have to be checked to verify the identity of the identified person;
- the identification process must be documented and records have to be retained; and
- where video identification is outsourced, the documentation and record keeping requirements have to be complied with by the third-party service provider.