Remote electronic customer identification required for Know Your Customer processes
The European Commission released a document outlining its action plan to facilitate the cross border financial services market in the EU, and eID is a key element. One of the three pillars is the development of an “innovative digital world, which can overcome some of the existing barriers to the Single Market,” and a cornerstone in this digital world is remote, electronic identification.
Today, just 7% of consumers have purchased a financial service from another EU Member State but eID use for remote identification of customers could expand this immensely.
The document is titled, Consumer Financial Services Action Plan: Better Products, More Choice. It outlines actions that will facilitate citizen access to financial services beyond national borders, such that a citizen of one country might bank in another country and be insured in yet another. The report notes that today, just 7% of consumers have purchased a financial service from another EU Member State.
Specifically, the plan outlines 12 action items. Action Item 11 specifically relates to remote identification, citing, “the Commission will facilitate the cross-border use of electronic identification and know-your-customer portability based on eIDAS to enable banks to identify customers digitally.”
Recent EU regulation enables cross-border sharing of electronic identification for government services, and this plan suggests it should be extended to consumer financial services.
Section 4.2.1. Remote identification notes that technology is automating checks on companies, people and ID documents to meet know-your-customer requirements through remote identification.
The plan states that government-issued eIDs “make it possible to open a bank account on-line while meeting the strong requirements for customer identity proofing and verification for know-your-customer or customer due diligence purposes. The legal certainty and validity of qualified eSignatures, as provided for under eIDAS, could also enhance the security of electronic transactions. This should work across borders and across sectors, and it should have the same legal effect as traditional paper based processes.”
The EU’s new anti-money laundering directive recognizes the eID capabilities and accepts them as tools to meet customer due diligence requirements. This plan stresses that EU Member States should ensure that the eID schemes they are preparing will be interoperable and available also for private sector use.
The Commission is conducting a study to assess the current best practices for remote identification and customer due diligence across the EU. They are also preparing for tests of cross-border eID use by banks.