Knowledge

Verification of identity forms part of the customer due diligence exercise that firms undertake as part of their risk assessment during the client take-on process. In compliance with AML and CFT obligations, firms must be satisfied with their identification and verification of individuals and, as relevant, their source of funds or wealth.

Prior to the lockdown, the verification of individuals was conducted on a face-to-face basis through physical meetings or, where an individual was unable to attend a meeting in person, by the provision to the firm of certified copies of their identification data. Lockdown has not led to change in the AML/CFT requirements on Guernsey firms. However, it has forced certain firms to utilise alternative methods of verification with which they may be unfamiliar – electronic verification being one such example.

Chapter 5 of the Guernsey Financial Services Commission's ("GFSC's") Handbook on Countering Financial Crime and Terrorist Financing (the "Handbook") permits firms to use electronic verification as long as the firm is satisfied as to the validity and veracity of the identification data used to verify the identity of a natural person.

Adopting video conferencing as identity verification may expose firms to potential AML or CFT breaches. In response to enquiries from firms whose staff are working from home, the GFSC recently issued guidance to assist firms in complying with the Handbook when identifying individuals by way of video call on a smartphone or similar device. The GFSC guidance is as follows:

• the video call should allow the firm and the individual to make both visual and verbal contact simultaneously. The call should be of a sufficiently good quality to enable clear verbal communication and to allow the firm to clearly see the face of the individual and identity data and security features in the identity document;
• the individual must have with them their original identity document during the call and not a copy;
• the firm should confirm that the image in the identification document reflects that of the individual;
• during the call the firm should be able to review the individual's identity data in the original identification document produced by the individual to verify the individual is who he/she purports to be;
• checks should be made on the authenticity of the document during the call by reviewing the security features in the original identification document.  This can also be automated if the software being used for the video call itself (for example where it is through an appropriate app) has the capability to carry out authentication checks or by using separate software solutions, such as those that check the algorithms used to generate passport numbers; and
• the firm should keep records to ensure that accurate and complete customer due diligence information is held to meet the requirements of paragraph 14 of Schedule 3 to the Handbook.

In light of the above, firms should be aware that the use of video verification is likely to have implications for other regulatory requirements such as data protection legislation if the firm is collecting personal data and retaining it for AML/CFT requirements.

In addition, the Handbook requires a firm to periodically review the identification data it holds to ensure it is accurate and relevant. The GFSC considers that such reviews would include a determination as to whether verification via video remains appropriate and relevant in light of the activity over the business relationship and related risks.