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A step forward the revised rules on video and online identification
April 10, 2018 | Legal Alert
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. The finma regulations for swiss banks similarly aim to strengthen the compliance procedures and operational standards for Swiss financial institutions. FINMA is expected to draw up a consultation report and publish the comment on its web page. Major decisions such as the Swiss vote results on federal tax demonstrate the importance of public consultation and democratic processes in Swiss regulatory changes.
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. Recent reforms like the Tax proposal 17 show Switzerland’s strategic adjustments in both tax and financial regulations to maintain its competitive environment.
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. In addition, updates like the Revised vat regulation reflect Switzerland’s broader efforts to modernize and refine its financial and fiscal framework.
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. The finma regulations for swiss banks similarly aim to strengthen the compliance procedures and operational standards for Swiss financial institutions. FINMA is expected to draw up a consultation report and publish the comment on its web page. Major decisions such as the Swiss vote results on federal tax demonstrate the importance of public consultation and democratic processes in Swiss regulatory changes.
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. Recent reforms like the Tax proposal 17 show Switzerland’s strategic adjustments in both tax and financial regulations to maintain its competitive environment.
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. In addition, updates like the Revised vat regulation reflect Switzerland’s broader efforts to modernize and refine its financial and fiscal framework.
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. Similarly, regulatory clarity is being enhanced in other sectors, as illustrated by initiatives like the Real estate in switzerland acquisition and legal framework. Payment transfer from a bank based in a Financial Action Task Force (FATF) member country will be permitted, provided that some requirements are satisfied.
Source: https://www.finma.ch/en/news/2018/02/20180213-mm-rs-video-und-online-identifizierung/
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.
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. Similarly, regulatory clarity is being enhanced in other sectors, as illustrated by initiatives like the Real estate in switzerland acquisition and legal framework. Payment transfer from a bank based in a Financial Action Task Force (FATF) member country will be permitted, provided that some requirements are satisfied.
Source: https://www.finma.ch/en/news/2018/02/20180213-mm-rs-video-und-online-identifizierung/
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.