The number of digital identity verification checks is predicted to surpass over 70 billion in 2024 alone—with even bigger predictions moving towards 2028. And while this presents many opportunities for better, more streamlined onboarding and convenient compliance, there’s also potential for fraudsters to undertake impersonation fraud.

In light of this, the Joint Money Laundering Steering Group (JMLSG) has published a revision to paragraph 5.3.89 in Part I of its guidance. Here, we explore what the proposed changes are and how to stay compliant when approved by HM Treasury.

What are the proposed changes?

The tentative amendments made by JMSLG aim to manage the risk of impersonation fraud when identity is verified electronically.

The change states:

“Where identity is verified electronically, copy documents are used, or the customer is not physically present, a firm should apply an additional verification check to manage the risk of impersonation fraud by directly linking the customer to the claimed identity. In this regard, firms should consider:

• Verifying with the customer additional aspects of their identity which are held electronically; or
• Utilising biometric data (including facial recognition and liveness checks where appropriate); or
• Requesting the applicant to confirm a secret code, or biometric factor—such codes, digital verification or other secret data may be set up within the identity, or may be supplied to a verified mobile phone, or through a verified bank account, on a one-time basis; or
• Following the guidance in paragraph 5.3.90”

What should firms be doing now?

Risk management and mitigation is no doubt already a top priority for your firm, and although the change JMSLG has proposed hasn’t yet been approved by HM Treasury, it’s unlikely stricter measures on anti-money laundering will be rejected.  

You can never be too prepared when it comes to your AML strategy. So, getting ahead of the approval of the new requirements can only be an advantage for your firm.  

1.Analyse your business' risk assessment

When regulations change, it can impact almost any area of your wider risk strategy. With change potentially on the horizon, revisiting your risk assessment and identifying areas that may be impacted either directly or indirectly is a good place to start.  

Once you know what may need to change, implement these. For example, setting up secret data within your clients’ identities, to provide an extra authentication layer and ensure you’re meeting AML requirements. Whatever you choose to change, be sure to communicate it to your teams to provide a consistent and solid way of managing risk, where everyone is on the same page.  

2. Consider implementing biometric checks

With more of a focus turning to AI and automation, more companies are implementing biometric checks that can help to further verify client identity.  

Features like liveness checks that enable clients to take a selfie which then gets compared to the identity documents uploaded are a quick, remote way to add an extra verification layer that will help satisfy stricter electronic identity verification rules should they happen.  

3. Update your AML policies every year

Technology moves quickly. And with this, new risks and threats evolve just as quickly. But with new legislation and guidelines taking time to be approved, passed, and implemented, it’s crucial that your firm is conducting a review of your AML policies at least annually.  

This not only protects you from the risk of penalties issued by regulators but can also help save your firm from reputational damage, helping to keep your revenue figures looking healthy. Whenever you implement new measures or make any changes, be sure to document this and store somewhere safely. This information will serve as evidence of your commitment to risk management and the lengths you’re going to, to minimise risk of money laundering and further financial crimes.

As experts in the compliance sector, we can help your firm to get on top of the latest and upcoming regulations, and ensure you are always compliant with AML legislation.  

Our range of people checks include the Veriphy Biometric Check which enables robust on-the-go ID verification. Our online identity verification app includes facial recognition, ID capture, and liveness appraisal, so you can rest assured you’re taking all the necessary steps to verify client identity.  

Want to find out more about how we can help you? Get in touch today to speak to our experts.  

Author

Adam Watts

Account Manager

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