The use of modern solutions to establish business relationships without the physical presence of the customer has become extremely important in recent years, especially in the context of the restrictions caused by the Sars Cov-2 pandemic. Although such solutions already existed and the Office of the Polish Financial Supervision Authority (UKNF) had issued a position in this regard, it was only the pandemic that prompted financial institutions to take a greater interest in remote identification solutions using smartphones and new technologies (e.g. OCR, ML). As a result, at least as of 2019, a large proportion of them have implemented video verification solutions for account opening. At the same time, there is a clear trend towards reducing the number of physical branches.
The expectations of the Office of the Polish Financial Supervision Authority – 2019
The UKNF’s position paper on the identification and verification of customer identity based on video verification, published in June 2019, clarified the requirements to be met when implementing this form of customer onboarding.
Particular emphasis was placed on:
- Preparing institutions to implement this type of identification
- Analysing the potential risks (in terms of business model, technology and operational risks)
- Possible measures to counter the identified risks
The authors of the paper emphasise that the use of video verification services should be accompanied by the application of enhanced security measures to minimise the risk of misidentification of the customer (e.g. checking the identity against the PESEL (personal ID numbers) or RDO (ID cards register) databases, checking that a person is acting alone).
Clearly, it is the institution that bears the risk arising from the application of the new form of customer identification. Therefore, its implementation should be preceded by a period of testing, training of operational staff in the relevant institutions, extensive consultation and ongoing supervision leading to continuous review of procedures and processes.
UKNF’s position paper on proper identification – 2023
It is worth starting at the end of the position paper, where the UKNF expresses its expectation that supervised entities will follow good practices in relation to the use of solutions for the remote establishment of customer relationships.
The UKNF also expects these firms to carry out an analysis of their compliance with the requirements of the position paper and to make appropriate changes to their processes, practices and internal rules without undue delay.
This means that as part of its inspection activities, the Authority has reviewed selected implementations and identified areas for improvement.
Considerable attention has also been given to the ongoing review and updating of policies, strategies and procedures and to the issue of risk analysis and assessment, including the ongoing monitoring of the operation of the customer video verification process.
The role and specific responsibilities of designated managers (AMLRO) responsible for ensuring that the institution’s activities comply with the Anti-Money Laundering Act were also highlighted. Such persons should ensure that documents (e.g. procedures, policies, strategies) are effectively implemented, and should review and update them.
Failure to comply with good practices may be a reason for the UKNF to issue recommendations, which may include taking certain measures to comply with the regulations or to reduce risks in the entity’s activities. In addition to the issuance of such recommendations, the AML Act provides that a fine of up to PLN 1,000,000 may be imposed on the entity and the AMLRO if the obligations are not fulfilled.
This means that entities using or intending to use video verification tools should review them immediately in order to avoid potential adverse legal consequences.
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