Circular 4/2016 (GW) remains suspended beyond the turn of the year, circular 1/2014 (GW) continues to apply.
Important notice: On 19 October 2016, BaFin issued an updated information on the timeline for new provisions regarding customer due diligence via video transmission.
On 11 July 2016, BaFin announced that it is to suspend its circular 4/2016 (GW) until the end of 2016. Currently, the authorities are developing concrete provisions for adequate and practical safety requirements for the video identification procedure. Now BaFin gives notice that they intend to publish a new circular in this respect at the beginning of 2017 and that they will provide for an appropriate transition period until the second quarter of 2017. Until the new provisions are brought into effect, BaFin circular 4/2016 (GW) continues to be suspended and circular 1/2014 (GW) remains in force.
In 2014, BaFin had published a circular regarding the interpretation of section 6 (2) no. 2 of the German Money Laundering Act (“GwG”) which prescribes enhanced customer due diligence in cases of non-face-to-face customer identification.
According to the aforementioned prescription, an enhanced risk must be assumed so that institutions will be subject to the enhanced customer due diligence measures stipulated therein if the customer is a natural person who is not personally present for verification of his identity. In such cases, in order to compensate for the enhanced level of risk, the institution must verify the identity of this customer in accordance with the procedures listed exhaustively in section 6 (2) no. 2 GwG; in particular, one of the customer’s transactions must be carried out directly from an account opened in his/her name with an EU-payment institution or an equivalent third country-credit institution.
In its circular 1/2014 (GW), BaFin had informed that the German Federal Ministry of Finance had interpreted this prescription to the effect that “personal presence” may also be assumed in certain circumstances (so that the enhanced due diligence measures of section 6 (2) no. 2 GwG will not apply) if the parties participating in the identification process cannot be physically seen in person but may nonetheless be seen via video transmission and if it is simultaneously possible to make verbal contact and to verify the customer’s identity with an identification document.
Thus, since the publication of BaFin’s circular 1/2014 (GW), customer identification and verification via, e.g. skype, or other video transmission formats was principally admissible for all banks, financial institutions and other institutions subject to the German anti-money laundering legislation. In chapter III of the circular BaFin had prescribed certain standards and procedures for institutions using video transmission to identify their new customers.
You can read circular 1/2014 (GW) here.
On 10 June 2016, with the publication of – currently suspended – circular 4/2016 (GW), BaFin had tightened the requirements for a verification via video transmission compliant with the GwG. In addition to the actual video identification process, BaFin required a reference bank transfer (see above) and the verification of the customer’s identity by means of publicly available data. Furthermore, BaFin had announced in this circular that customer verification via video transmission was supposed to be only available for credit institutions – not any longer for financial institutions, payment service providers etc. These augmented requirements were criticized throughout the financial industry.
Only one moth later, BaFin removed the circular from its homepage and announced that it was temporarily suspended. This suspension was now prolonged until the beginning of 2017. It will be very interesting to see what requirements BaFin will establish in the future regarding identification and verification of non-face-to-face customers.