On 23rd January, Mondo Visione reported that the Joint Committee of the 3 European Supervisory Authorities (EBA, EIOPA and ESMA – together referred to as ESA) have published an Opinion on the use of innovative solutions by credit and financial institutions when complying with their customer due diligence (CDD) obligations.  This Opinion is described as part of the ESAs’ wider work on creating a common understanding on the responsible and effective use of innovation by credit and financial institutions, which can enhance their AML/CFT controls.  The news release from the ESA points out that EU law is technology-neutral and does not set out in detail how these CDD measures should be applied, giving an opportunity to financial and non-financial innovators to explore new ways of meeting institutions’ CDD obligations.  While these innovations can improve the effectiveness and efficiency of AML/CFT controls, there is a risk that they could weaken ML/TF safeguards, if applied unthinkingly.  An example of new technology use are solutions that involve non-face-to-face verification of customers may contain built-in features that can establish whether the identity document presented belongs to the person presenting it.  The ESA aim to foster the development of a common understanding between national competent authorities across the EU of the appropriate use of innovative solutions and encourage national competent authorities to support those solutions where these improve the effectiveness and efficiency of AML/CFT compliance.

The Opinion proposes that national competent authorities should consider –

  • oversight and control mechanisms;
  • the quality and adequacy of CDD measures;
  • the reliability of CDD measures;
  • delivery channel risks; and
  • geographical risks.

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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