The increased availability of customers via smartphones and internet in the modern day may be used by financial service providers to improve relationships with their clients. This may be the utilisation of E-Mail or SMS for reporting as well as the use of state of the art communication tools to ease the know-your-customer requirements.
On 8 April 2016, Luxembourg’s Commission de Surveillance du Secteur Financier (the “CSSF”) issued a frequently-asked-question document providing guidance for entities under its supervision (hereafter each a "Professional”) to comply with their know-your-customer obligations under use of online videoconference techniques (the “Video FAQ”).
Video identification will only be possible for natural persons where no doubts about authenticity, reliability or even a suspicion exist. For legal persons only the natural persons being their representatives, proxy-holders or similar may be identified in that way.
The Video FAQ provides detailed technical requirements for the use of such technique. One of these is that the identification via videoconference must be linked to information that has been collected before in combination with a Pin or Tan system.
Every Professional may use their own tool, a tool of a third party or delegate the task to a third party. Prior to doing so, they must analyse the impact of the use of video-identification technique for the purposes of their own ML/TF risk assessment and document this properly together with appropriate internal policies and processes.
The CSSF maintains that applicable rules for delegation (selection, due diligence and monitoring) remain and that weather independent (if done in-house) or delegated, it remains the responsibility of the Professional to ensure that their customer due diligence obligations are fulfilled in accordance with the Luxembourg AML/CTF framework.
Interested professionals should verify the applicable data protection rules in Luxembourg and in the different jurisdictions where the customers are located. As the identification will include snapshots and video-clips, the customer will need to consent to this prior to the identification (incl. potential external storage requirements). Besides the need for a stringent user-right policy for accessing the retained information the encryption of the data will need to be applied if the storage shall take place outside of the network of the professional.
The Video FAQ clarifies that Professionals may use state of the art techniques for complying with their know-your-customer obligations. For transfer agents acting on behalf of a multiple number of funds with retail clients, this may provide possibility to make the re-identification and recurring verification of investors easier and less painful for involved parties. Every professional will have to make their own assessment in how effective the additional effort will be in providing a powerful tool to improve the service to its clients. KWM may assist its clients in obtaining the required knowledge and approvals from data protection authorities through its own network offices around the globe.