On January 23, 2018, the Joint Committee of European Supervisory Authorities published an Opinion addressed to EU national regulators to develop a common understanding of the appropriate use, by credit and financial institutions, of innovative methods to meet Customer Due Diligence obligations.
All firms that are subject to the Fourth Money Laundering Directive must put in place effective policies and procedures, including effective CDD procedures, to address the risk that their businesses may be used for money laundering or for terrorist financing purposes. 4MLD is "technology neutral" and does not set out specific steps or procedures that must be followed for CDD. There is scope, therefore, for new ways to verify customers' identity, for example non-face-to-face verification using traditional identity documents (such as passports) through portable devices or verification via centralized databases. Innovative means such as artificial intelligence are also increasingly used for monitoring customer relationships, for risk assessment and in decision-making processes.
The ESAs recognize that innovative solutions can improve the effectiveness and efficiency of AML/CFT controls and firms often use innovative solutions to meet demand for improved customer experience and costs savings. The ESAs believe that firms should not be prevented from using such solutions, provided that proper safeguards have been put in place to mitigate the ML/TF risk associated with the firm's business relationships and risk profile. The ESAs' Opinion highlights additional factors that national regulators can take into account when assessing the adequacy of any proposed use of innovative CDD solutions. These include: oversight and control mechanisms; the quality and adequacy of CDD measures; the reliability of CDD measures; delivery channel risk; and geographical risks.
The Opinion is available at: https://esas-joint-committee.europa.eu/Publications/Opinions/Opinion%20on%20the%20use%20of%20innovative%20solutions%20by%20credit%20and%20financial%20institutions%20(JC-2017-81).pdf
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